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Mike purchased his home five years ago for $250,000. Its current market value is $275,000 and has a mortgage balance of $195,000. He wants to put in a pool and pay for it with a HELOC. If the lender requires a maximum LTV of 80%, what is the most Mike will receive from the proceeds of the HELOC?

Respuesta :

Answer:

$25,000

Explanation:

Given:

Purchase price of home = $250,000

Market value = $275,000

Mortgage balance = $195,000

Maximum LTV = 80%

Now,

The maximum amount of LTV = LTV × Market value

= 0.80 × $275,000

= $220,000

thus,

The maximum amount of HELOC = $220,000 - Mortgage balance

or

The maximum amount of HELOC = $220,000 - $195,000

or

The maximum amount of HELOC = $25,000

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