For homeowners that have exemplary credit a lender may offer what is known as a 125 HELOC. A 125 HELOC is a home equity line of credit that is equal to 125% of the equity in the home. For some situations a homeowner may need as much cash as possible for a given purpose. A 125 HELOC loan makes certain the full resources available can be used.
125 HELOC credit standards
It’s easy to understand why it is that lenders are only willing to lend 125% of a home’s equity to someone who has an outstanding credit record. Essentially the lender is betting that the home will continue to increase in value and that if it doesn’t, the borrower is a good risk and will be able to pay the entire loan back at some point in the future.
Depending on the market conditions, the lender’s requirements for a home equity line of credit may be so strict it may preclude anyone with the slightest blemish on their credit record.
Is a 125 HELOC a good idea
That’s a good question and can only be answered by the homeowner. When considering a 125 HELOC it is very important to take a hard look at whether that much money is really needed. Just because a homeowner can take a 125% of home equity loan doesn’t mean they should. It’s important to not pad the amount taken to cover for a rainy day. Take only the amount of funds that you anticipate you will need with very specific purposes in mind such as a home remodel or paying college tuition.
Homeowners with a good credit history may need to take advantage of a 125 HELOC because of their financial situation. All of the tenets of good loan management still apply to these cases. Do you homework and shop for the best interest rates and loan terms available. If you find a lender offering terms that are acceptable to you then take advantage of all of your hard work you’ve put into keeping a good credit score and get a 125 HELOC home equity loan.