Home equity loan. Loan on the value of your house that is not borrowed against already from your 1st mortgage.
House worth $100,000? Got a $70,000 mortgage on it? You got $30,000 in equity!
But here's the thing: sometimes you don't get approved to 100% of the value of your house. Sometimes you get approved for, let's say 90%.
This is the math for 90% loan-to-value.
House worth $100,000. 90% of this is $90,000. That is the amount you may have borrowed against your house. Have a $70,000 1st mortgage already? Then your approval is up to $20,000.
Does that make sense? It's not really that hard, is it?
And yet, repeatedly, customers will argue with this. Because for some reason, being approved for 90% loan-to-value translates in their mind to being approved for 90% of the remaining equity. So, in the above example, they say: house worth $100,000. Have $70,000 loan already on it. $30,000 in equity left. 90% of that is $27,000.
NO.
No, no, no, no, NO.
If you got a loan for $27,000, that would be 97% loan-to value. 70k + 27k = 97k. 100k value. 97% loan-to-value. NOT 90% loan-to-value.
I mean, seriously, how does that even make sense?
Say you have a house worth $100,000 and a $50,000 mortgage on it. This means you are already at 50% loan-to-value. You are already borrowing up to 50%. By your math, you could borrow 50% of what is left: another $25,000, and somehow still be at only 50% loan-to-value?
Now I admit, I do get math, but is it really that difficult to understand?
House worth $100,000? Got a $70,000 mortgage on it? You got $30,000 in equity!
But here's the thing: sometimes you don't get approved to 100% of the value of your house. Sometimes you get approved for, let's say 90%.
This is the math for 90% loan-to-value.
House worth $100,000. 90% of this is $90,000. That is the amount you may have borrowed against your house. Have a $70,000 1st mortgage already? Then your approval is up to $20,000.
Does that make sense? It's not really that hard, is it?
And yet, repeatedly, customers will argue with this. Because for some reason, being approved for 90% loan-to-value translates in their mind to being approved for 90% of the remaining equity. So, in the above example, they say: house worth $100,000. Have $70,000 loan already on it. $30,000 in equity left. 90% of that is $27,000.
NO.
No, no, no, no, NO.
If you got a loan for $27,000, that would be 97% loan-to value. 70k + 27k = 97k. 100k value. 97% loan-to-value. NOT 90% loan-to-value.
I mean, seriously, how does that even make sense?
Say you have a house worth $100,000 and a $50,000 mortgage on it. This means you are already at 50% loan-to-value. You are already borrowing up to 50%. By your math, you could borrow 50% of what is left: another $25,000, and somehow still be at only 50% loan-to-value?
Now I admit, I do get math, but is it really that difficult to understand?
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