Question

A few years ago, Michael purchased a home for $380,000. Today the home is worth $336,000. His remaining mortgage balance is $142,000. Assuming Michael can borrow up to 80 percent of the market value of his home, what is the maximum amount he can borrow?

Answer 1

Answer:

The maximum amount he can borrow is $126,800.

Explanation:

Given:

Michael purchased a home for $380,000.

Market value of home = $336,000.

Current mortgage balance = $142,000.

Rate of borrowing at the market value = 80%.

Now, to find the maximum of amount Michael can borrow.

So, we find first the maximum mortgage amount:

Maximum mortgage amount = 80% of market value.

                                               $=\frac{80}{100}\times 336,000$

                                               $=0.80\times 336,000$

                                               $=\ 268,800.$

As, he still owes $142,000 mortgage in his home.

Now, to get the maximum amount he can borrow we use formula:

Maximum amount he can borrow = Maximum mortgage amount - Current mortgage balance.

Maximum amount he can borrow $=\ 268,800-\ 142,000$

Maximum amount he can borrow $=\ 126,800.$

Therefore, the maximum amount he can borrow is $126,800.