1) Read the information about home equity lines of credit on page 108-109 in you

Question

1) Read the information about home equity lines of credit on page 108-109 in your textbook (especially the "by the numbers" in lower right on page 109) and complete the following questions:

A. customer has a house that is appraised for $225,000 and has a current loan balance of $175,000.

a. How much equity does he/she have?

b. If the bank's loan guidelines state that you cannot exceed 85% LTV, how much can you borrow the customer?

2) A customer has a house with a tax assessed value of $325,000 and has a current loan balance of $228,000.

a. If the bank's loan guidelines state that you cannot exceed 75% LTV, how much can you borrow the customer?

b. If the bank's loan guidelines state that you cannot exceed 90% LTV, how much can you borrow the customer?

ASAP Thanks.

Explanation / Answer

1

a)

Equity=Value-Loan=225000-175000=50000

b)

LTV=85%

So, Maximum Loan=85%*Value=85%*225000=191250

2

a)

LTV=75%

So, Loan=75%*Value=75%*325000=243750

He has already borrowed 228000. So, additionall borrowing permitted=243750-228000=15750

b)

LTV=90%

So, Loan=90%*Value=90%*325000=292500

He has already borrowed 228000. So, additionall borrowing permitted=292500-228000=64500

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