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A property is purchased for $200,000 with an 80 percent LTV. After five years, the owner's equity is $80,000. What would be the approximate annual expected appreciation rate on home equity (annual EAHE)?

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Karabo99

Answer:

The approximate annual expected appreciation rate on home equity (annual EAHE) is 14.87%

Explanation:

loan amount = purchase price*LTV

                      = $200,000*0.80

                      = $160,000

for n being the number of years:

annual EAHE = (loan/equity)^1/n

                       = ($160,000/$80,000)^1/5

                       = 14.87%

Therefore, The approximate annual expected appreciation rate on home equity (annual EAHE) is 14.87%

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