A 125 percent loan, also referred to as a mortgage, has an initial principal amount equal to 125 percent (1.25x) of the property’s original value. For example, if a house is worth $300,000, a 125 percent loan would provide access to $375,000 for the borrower. 125 percent loans originally became popular in the 1990s, and were designed for low-risk customers with excellent credit ratings and histories who needed additional funds beyond their available home equity. Because they are riskier for lenders, 125 percent of loans have higher interest rates than regular mortgages—sometimes as much as double the rate.