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Since equity is the difference between the amount owed on the loan and the current market value of the home or property, a "no equity loan" means that you may take out a loan on a home even if there is no difference between the amount owed and the current home value. A high LTV (loan-to-value) equity loan means that you may take out a loan up to 125% of the value of the property. No equity loans are considered somewhat riskier than lower LTV loans, and the rates are sensitive to a person's credit score. The money from the no equity loan may be used for any purpose including debt consolidation, home improvements, business ventures, vacations, tuitions, or any other purpose. Savvy homeowners often take advantage of no equity loans or second mortgages to consolidate their credit card debts. Many new homeowners who may not yet have built equity find that a no-equity loan is a convenient way to lower overall monthly payments and consolidate debts incurred while financing or furnishing their new home. Since a no-equity loan is a second mortgage home loan, the interest may be tax deductible. The tax deduction along with the monthly savings adds up to a quicker way to pay off debt and free up some cash in a hurry. A tax advisor should be consulted to determine interest deductibility. |
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