Sometimes, homeowners borrow equity from their primary residence to finance down payments.
Such loans enable homeowners to borrow against the value of their homes to make home improvements or to have extra cash flow.
That rate, he said, is almost twice as high as the rate when homeowners borrowed directly from lending institutions.
In turn, homeowners can lower their monthly payments and borrow additional money.
As interest rates fell and home prices appreciated, homeowners could borrow money against the increased value of their homes or just take out cash in a refinancing.
With a 125 percent loan, the homeowner can borrow another $100,000, resulting in total debt of $250,000.
The homeowner can borrow as much as is needed up to the maximum allowable amount.
And homeowners borrowed heavily, either to get into a more expensive home or to extract equity from the homes they already owned.
With a line of credit plan, the homeowner borrows against an approved loan amount.
She also said that homeowners refinancing a home equity loan should borrow only what they need to pay off the existing loan.