Credit Limit. Refer to question. What will Mary and Marty's credit limit be if the bank uses the market value of equity to determine their credit limit and will loan them 70% of the equity?
Question
Credit Limit. Mary and Marty are interested in obtaining a home equity loan. They purchased their house five years ago for $125,000 and it now has a market value of $156,000. Originally, Mary and Marty paid $25,000 down on the house and took out a $100,000 mortgage. The current balance on their mortgage is $72,000. The bank uses 70% 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 70% of the equity?
