Updated almost 6 years ago on . Most recent reply
HELOC Calculation Misunderstanding
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
Your banker is correct as they are proposing a cumulative 80% loan to value not 80% of the equity . $20,000 is the number.