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No Equity Home Loan - Is A No Equity Home Loan Your Best Choice

While there are many options available to the homeowner when it comes to borrowing money, one that is often misunderstood is the no equity home loan. It may seem like a great choice in your time of needing cash, but is it a good decision. Here are some points to consider.

One of the biggest points to keep in mind is that borrowing money comes with a price and in the even of a no equity home loan, it can be steep.

It's one thing to borrow a portion of the equity you have built up in your home, but to borrow more than its value is another story. You really need to give careful consideration before making any decision.

-Expect higher interest rates

The APR on a no equity home loan can easily be up to 5% higher than on a standard home equity loan. Of course, this will vary depending on the loan terms, your current credit history, etc.


In almost all circumstances, a no equity home loan will require the borrower to have PMI, private mortgage insurance. This will add further costs to any loan.

-Tax implications

You will need to check which your tax advisor, but any loan that is greater than what your home is worth will not be deductible on your taxes. Needless to say this can have a dramatic effect come tax time.

-Selling your home

Be prepared to hang onto your home when you take out a no equity home loan. Why? Because you will owe so much more on the home than it is valued at. You would need to come up with the balance at closing time.

These are a few of the reasons why you should carefully consider whether a no equity home loan is right for you. In most cases it may not be.

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