Question

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)?

Answer 1

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

Step-by-step 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%