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Updated over 5 years ago on . Most recent reply

User Stats

6
Posts
1
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Brandon Wood
  • TN (tennessee)
1
Votes |
6
Posts

HELOC Calculation Misunderstanding

Brandon Wood
  • TN (tennessee)
Posted

I'm just getting started in REI and went to my bank today to inquire about opening a HELOC. My bank said they would loan 80% of equity. However, when calculating the lendable equity, she used the formula:

Estimated Home Value - 370,000

Current mortgage balance - 276,000

370,000 x .8 = 296,000

296,000 - 276,000 = 20,000

She said my lendable equity is 20,000.

My understanding is that the calculation should be:

370,000 - 276,000 = 94,000

94,000 x .8 = 75,200

Lendable equity should be 75,200.

Am I missing something?

Most Popular Reply

User Stats

572
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572
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Derek Dombeck
  • Real Estate Consultant
  • Wittenberg, WI
572
Votes |
572
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Derek Dombeck
  • Real Estate Consultant
  • Wittenberg, WI
Replied
Your banker is correct as they are proposing a cumulative 80% loan to value not 80% of the equity . $20,000 is the number.

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