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Mary and Marty are interested in obtaining a home equity loan. They purchased their house five...

Mary and Marty are interested in obtaining a home equity loan. They purchased their house five years ago for ​$136,000​, and it now has a market value of ​$177,821. ​Originally, Mary and Marty paid ​$33,962 down on the house and took out a $ 102,038 mortgage. The current balance on their mortgage is ​$96,539. The bank uses 65​% of equity in determining the credit limit. What will their credit limit be if the bank bases their credit limit on equity invested and will loan them 65​% of the​ equity?

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Answer #1

Equity is the Value of Home less any debts on it. Bank finances up to 65% of the Equity means :-

65% (Market Value - Debts)

65% ($177821 - $96539) = $52833.3

Their credit limit will be up to $52833.33

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