No equity home loans
No equity home loans are quite popular in countries like United Kingdom, United States etc. In technical terms, it can be said that no equity home loan is basically a more attractive name provided to the high LTV, in which a person is able to get amount equal to or more than the value of property through mortgage. In some cases, even loan can be obtained for 125% of value of property.
There are many online and offline lending institutions in United States that provide above loans. Online sources have gained more popularity as these allow a person to get no equity home loan in an easy way. For example, Loan Biz Inc is one of most popular online sources in United States. It is located at 22603 La Palma Avenue, Suite 307, Yorba Linda CA. It can be contacted over phone at 714-692-5400 and at the toll free number 800-746-6509. There are some requirements that have to be fulfilled regarding no equity home loans. For example, Loan Biz requires a person to have an excellent or good credit history for required loan. It provides loans in state of California only.
In the past few years, home values have risen considerably and interest rates have gone down. These two factors have forced many people to go for equity home loans. By tapping increase in equity, people have been able to use money for different types of purposes like paying off high interest debt, financing home improvements etc. These loans have been able to lure thousands of people to utilize that much equity in home that they do not actually possess. If seen carefully, it would be observed that above type of loan creates secured loans as well as unsecured loan. This is because all amount financed over the amount of equity a person has in his home would create an unsecured loan in his favor.
Many financial experts have termed these loans as risky and expensive loans that are aimed to capture those people who desperately need cash. Another factor that makes the condition worse is that fact that these loans have been provided in huge numbers to people suffering from bad credit. Such type of lending is called as sub prime lending and each one of us is aware what happened in United States where economy has been hit quite hard by sub prime lending. It is really surprising to note that overall loan originations in United States towards sub prime lending including no equity home loans was $25 billion in the year 1993 and it has crossed $180 billion at present.
0in 0in 0pt">Though interest rates have come down in past few months, it is important to understand here that no equity home loans are provided at quite high interest rates by various lending institutions. This is done for covering the risk associated with over lending and real estate prices depreciation. It has been seen that rates attached with these loans are from 2-6% higher than the traditional home equity loan rates. Story does not conclude here. Apart from high interest rates, there are many types of fees and charges also that are applied in such home loans.
These fee and charges are definitely higher than those attached with normal home equity loans. If total cost of no equity home loan is considered, it is indeed huge and varies greatly from one lender to another. Total cost of loan depends upon the credit rating of a person, interest rates prevailing in the market, actual structure of loan and the lender that is providing finance. There are many lending institutions which require a person to buy PMI or Private Mortgage Insurance. This also increases the cost of loan in great manner and is charged as 0.5-1% of the loan amount. Fee is added to loan amount. A person should understand that he needs to get PMI for covering the loan amount that is more than 80% of the value of home. Thus, PMI is required for getting cover on 20% of the no equity home loans secured part.
There are also some types of tax implications regarding these loans. Maximum amount of home loan interest which is tax deductible is $100000. In case, a person is married and each one of them is filing income tax returns separately, maximum amount is restricted to $50000. However, in case of above type of loans, picture is slightly different. Also, any interest paid that is more than the value of home is tax deductible. Thus, it is advised here that a person should consult tax advisor if he has taken a no equity home loan and is applying for tax deductions.
Selling of home after taking above type of loan also becomes problematic. This is because if a person wishes to sell his home quickly that is worth $100000 and against which, he owes $125000, many steps that have to be taken. Even if a person deposits $100000 obtained through sale of home in his loan account, he still defaults with respect to loan. Some possible results in such case can be foreclosure or bankruptcy.
In past few years, many people have lost their homes due to no equity home loans. They had fallen prey to slick and luring advertisements given by lenders regarding these loans. If a person requires money urgently and he has no alternative other than home, he can go for a secured home equity loan and unsecured personal loan. This would help him in keeping his dwelling place safe and averting high risks.
It is advised that a person should try to avoid no equity home loans as much as possible.
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