A no equity home loan is simply a loan where some or all of it is unsecured by the equity of the borrower’s home. The value of the loan may be as much as 25% more than the value of the property. Obviously, this is a risky proposition for both the lender and the borrower.

In the past, many people have borrowed money against there homes to take advantage of low interest rates and tax savings. They then use this money to pay down other high interest loans and debt. If managed properly, this can make sense. But the no equity home loan, just like title loans on cars, have become ways for people who are already in financial trouble to increase their risk and get deeper in the hole.

Just like any unsecured loan, the no equity home loan typically comes with a very high interest rate – as much as 6% higher than conventional loans. On top of that the fees associated with these types of loans are considerably higher. Finally, the lender would have to purchase Private Mortgage Insurance to increase the cost even further.

You also lose the tax benefits of a conventional loan. Interest paid on loans that are higher than the value of the home are not tax deductible. And finally, there is the downside if you need or want to sell your home before you pay down the loan. The seller could easily owe more on the home than the sale price leaving them in a bind if they can’t come up with the cash. The lender could foreclose on the loan or the seller end up in bankruptcy.

All in all, the risks of the no equity home loan far outweigh the possible benefits and should be avoided rather than put your home at risk.

You can learn more about how to forfeit a home loan, and also get much more information, articles and resources regarding home loans at Homes Loans