High-Loan-to-Value Loan

A home equity refinancing loan typically at 125% of the market value of a home which makes it inherently high-risk and reserved for only the lowest-risk borrowers since a portion of the loan is unsecured and where the lender is gambling on the borrower’s integrity. Example: When the Dawsons refinanced their old $90,000 mortgage, they were able to get a high loan-to-value loan of $125,000, despite the fact that their home was worth only $100,000. They used the $35,000 cash proceeds of the transaction (minus transaction costs) to remodel and retire other existing debts