Question

1. You can afford a monthly mortgage payment of $1,650 and can get a 15-year 5.625% loan. What is the maximum loan you can get so your payment does not exceed $1,650?

2. You apply for a home equity loan. The lender gets an appraisal on your home, showing a value of $183,500. You have a first mortgage with a current balance of $87,435. Based on a 75% LTV ratio, what is the maximum line of credit you can get?

Answer 1

1. A suitable financial calculator will tell you the present value of 180 monthly payments of $1650 at an interest rate of 5.625% is ...
$200,307.94

2. .75*$183,500 -87,435 = 50,190
The maximum line of credit you can get is $50,190.