Home loans usually depend on the value of your home, allowing you to borrow money up to the total of the equity in your house. However, there are situations that require a larger loan than this, and under certain circumstances you can borrow up to 125% of the value of your house.
These loans are termed over-equity seconds, and they require you to use the equity in your house as the basis of the loan. This forms some security for the loan, the rest being compensated for by a higher rate of interest than you would pay for a loan that is entirely secured on the value of your house.
125% home loans can be really useful in situations where you need to consolidate loans, because the interest rate will be lower than totally unsecured personal or credit card loans. You can use this kind of loan as the basis to make your financial health better.
125% loans are also used for home improvements, particularly those that are going to raise the value of the house. You can borrow money to make your house more comfortable, or more attractive to potential buyers. This can make a real difference to the value of the house, and thus raise the equity in the house.
However you use your 125% home loan, you should be sure to look at all the options open to you. Companies will be able to quote you competitive rates o interest and terms on your loan, and you should take time and effort to be sure that you get the loan that best suits you.
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