| If you want to lower your monthly mortgage payment | | | | you don't need to have earned any equity.An |
| and need some extra cash on the side but | | | | open-ended home equity loan uses your home as |
| haven’t owned your home long enough to build | | | | collateral for a line of credit. The lender sets up an |
| up equity, there is a solution.We’re talking about | | | | amount of cash the borrower has access to use, and |
| a 125% home equity loan. The loan basically allows you | | | | the borrower may spend the cash all at once or |
| to borrow 25% more than your homes fair market | | | | whenever he or she chooses, using a credit card, |
| value or FMV. For example, if your home is worth | | | | checks or both to pull from the account. The |
| $300,000 a lender could finance a new loan for | | | | application process is very similar to a traditional |
| $375,000 giving the borrower an extra $75,000. This | | | | close-ended loan with title search, appraisal, attorneys |
| no equity loan becomes very useful, because it allows | | | | and points. “In addition to upfront closing costs, |
| you to consolidate credit cards that usually have higher | | | | some lenders require you to pay continuing fees |
| interest into the loan.There are two types of 125% | | | | throughout the life of the loan.” According to the |
| home equity loans; close-ended and open-ended. A | | | | Federal Trade Commission, “These may include |
| close ended loan is simply a second mortgage. The | | | | an annual membership or participation fee, which is due |
| loan has a set time limit, such as 15 or 30 years, and | | | | whether or not you use the account, and/or a |
| the amount of the payments don’t fluctuate | | | | transaction fee, which is charged each time you |
| because the interest rate is fixed. At closing, the lender | | | | borrow money.”Nick Rian is an award-winning |
| usually pays off the pre-existing mortgage and gives | | | | journalist whose journalism credits include awards from |
| the borrower the extra cash or “equity” in | | | | the Associated Press, Wisconsin Broadcaster's |
| one lump sum. First time homebuyers even get the | | | | Association and The Milwaukee Press Club. |
| opportunity to qualify for a 125 second loan, because | | | | |