Pros and Cons of a 125 Percent Loan

A 125 percent loan is a mortgage that will allow you to borrow as much as 125 percent of the value of your home. One of the advantages of this type of loan is that you will be able to borrow more money than you actually have collateral for. This type of loan also has disadvantages, here are some of the pros and cons of the 125 percent loan.

Pros

Many mortgages only allow you to borrow as much as 80 percent of the value of a property. By using this type of loan, you can borrow more money than what your house is worth and use the money to make other large purchases. If you use this money to make large purchases, you will be able to deduct the amount of interest on your taxes where you would previously be unable to do so when making a large purchase.

Cons

One of the disadvantages of this type of loan is that it makes it difficult for you to move out of your house. If you need to sell your property and leave, you will have to come up with money to pay off the mortgage. Your loan amount will be more than the property is worth and you will be required to pay the difference.

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