Today's world of home equity loans is a much more liberal one in which lenders allow consumers to have more borrowing power. As opposed to conventional second mortgage lending, through which a consumer can borrow 80-100% against the value of their home, today's lenders allow debtors to borrow up to 125% of the value of their home. Generally speaking, the higher the percentage value of the home that is being loaned, the higher the interest rate that is charged on the balance. These higher-risk loans are often called Over Equity Loans or "125's" and the interest rate on them is considerably higher. Using the example above, if John Doe was able to qualify for an over-equity loan, he may be able to borrow up to a total of $125,000 ($25,000 more than the value of his home). Over-equity loans can be helpful to consumers who need to reduce the burden of high monthly payment expenditures and desire to refinance debt amounts that exceed the value of their home.

For purposes of illustrating the benefits of over-equity loans, let's suppose John had $55,000 worth of credit card debt and he had to pay $1200 per month in minimum payments. A conventional mortgage refinance or second mortgage would not allow John to pay off all of his credit cards. The difference between the value of his home ($100,000) and the balance that he owed on his mortgage $55,000 would only leave him a maximum $45,000 of home value to borrow against. If John could not pay off his credit cards, he feels he will have to file bankruptcy because he cannot afford to pay his minimum payments on his credit cards and pay his other expenses. John really does not want to file bankruptcy. If he was approved for an over-equity loan, he could have up to $70,000 ($125,000 (125% value of his home)- $55,000 first mortgage) worth of borrowing power to pay off his credit cards. If the interest rate on John's over-equity loan is 14%, and John paid off his credit cards ($55,000) and car ($10,000), the effect of the loan on John's monthly expenditures would be as shown on the next page.