No Equity Home Loans or No Equity HELOCs are second mortgage loans that are offered to consumers, who have no equity in their homes. Having no equity in your home means that your mortgage loan is larger than your home's value. For example, if your home is worth $85,000 and your mortgage loan is $90,000 then you have a negative equity in the amount of $5,000. You can get refinancing mortgage to a 125% LTV No Equity Loan to take $16,250 out of your home.
Some financial professionals advise against no equity loans simple because they believe a home equity loan is just that. A loan that you get when you have equity in your home. The fact is consumers will do what is right for their situation. For some people debt consolidation or funding entrepreneurial endevors is important enough for them to get a no equity loan.
So what are the pros and cons of no equity loans?
Reasons to love No Equity Loans
1. You can get a large amount of cash to finance a start up business, home improvement project, pay off bills, etc.
2. You don't have to wait 5, 7 or 9 years for your home to appreciate before you get a no equity loan. If you refinancing mortgage $20,000 to $50,000 now - you can get the cash in a short period of time.
3. You can consolidate credit card bills, car payments, student loans and other bills to simplify your life. The lesser number of creditors you have - the better.
Points to Ponder
1. You will have to pay a higher interest rate on a no equity loan than on a traditional home equity loan. This is to be expected.
2. No equity loans are usually offered to consumers, who have a good FICO credit score of 670 or above. If your credit score is below 670, you will need to work with a subprime mortgage lender to find a similar loan product.
3. Ensure that you stay in your home long enough for the house to appreciate before you sell the house, otherwise you will be selling the house at a loss.
Research recommended no equity loan lenders at the loan resource guide: http://www.kstreetloans.com.
Sharon Listner writes about finances and conducts in-depth analysis on various loan products including no equity loans, 125% LTV mortgage loans and bad credit loans.
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