by: Lisa Stalwart

A 125% home equity loan is a mortgage loan that is equal to 125% of your home value. For example, if your home is worth $250,000 and you currently have a mortgage loan of $200,000, you can borrow $50,000 for a total of $250,000 (125% * $200,0000). 125% home equity loans offers several advantages over other type of loans.

Homeowners With Little or No Equity. Lenders are willing to provide 125% home equity loans to homeowners, who have little or no home equity. Homeowners who live in parts of the country where property does not appreciate rapidly or homeowners who recently purchased their homes, can use a 125% home equity loan to finance home improvement projects, credit card debt consolidation, personal projects, education, etc.

Lower Interest Rates. Borrowers can usually enjoy lower interest rates for 125% loans than other types of loans. Lower interest rates mean lower payments, which means that you can pay off more of the principle on your loan.

Enjoy Tax Benefits. The interest on your loan is tax deductible. Deductible interest can be a powerful source of tax savings. For full tax benefits, consult a tax specialist.

When looking for a 125% home equity loan, shop around for the best loan rates and terms through home equity loan quote services. Ensure that the service is provided free of charge to you. Once you get your quotes, you will find that not all lenders are created equal. The more lenders you have vying for your business, the better leverage, you have.