A Clear Look at a 125 Second Mortgage Loan

A 125 second mortgage loan is a mortgage that allows you to borrow up to 125% of the value of your home. They are highly publicized as being the solution to a homeowner’s money problems. The real facts, though, show that a second mortgage of any kind will not save you if you are in serious financial trouble. In fact, it could take you further into debt. That is why completely understanding a 125 second mortgage loan is very important. You can not rely on the hype from lenders. You have to get the facts yourself so you can really see what you are getting into.

The General Details

A 125 second mortgage loan usually offers some very impressive deals. You will get a lower interest rate than you would through a credit card. This is a bug selling point because when you need some extra cash, credit cards are usually the way to get it. So, with a 125 second mortgage loan you can get that extra money and end up paying less in the end on interest. Additionally, a 125 second mortgage loan offers a lower payment then a credit card loan.

The thing to keep in mind, despite these tempting deals, is that a second mortgage is a loan on your home equity. When you take out this loan you will have to pay the monthly payments for up to 20 years, depending on the length of your mortgage. If you default you risk losing your home and ending up in major debt.

The Risks

As mentioned, a second mortgage, like your first mortgage, is taking with your home as collateral. You are risking your home and that is something serious. You have to make sure that you can afford the loan before getting into it.

With a 125 second mortgage loan there is usually a charge for the loan. An average rate is usually 10% of the amount borrowed. This is a lot extra, depending on how much you are borrowing. That will also accrue interest and end up to be much more than 10% in the end. You have to watch out for this charge and make sure it is reasonable.

Also keep in mind that you have to pay off this second mortgage should you decide to sell your home. You should be very sure that you will not sell soon or you could end up making no money off of your home when you so sell it.

When a Second Mortgage Is Worth It

Obviously, a 125 second mortgage loan is not for everyone. However, for some people it is a good solution to money issues. If you:

- Find a low origination fee.
- Can afford to pay off the mortgage quickly through extra payments each month.
- Are sure it will work for your situation.

If you meet all three of these factors then you can probably take a second mortgage with no problems.