Question

Robby has a house that appraises for $125,000. Robby qualifies for an 85% LTV. He owes $63,000 on his first mortgage and $5,000 on his second mortgage. He would like to refinance his house into one mortgage loan and receive additional cash to pay off other debt. How much cash would be available if his closing costs are $4,200 and are financed in the loan?

Answer 1

$34,050

Explanation:

Data provided in the question:

Cost of house = $125,000

Maximum Loan = 85% of LTV

First mortgage = $63,000

Second mortgage = $5,000

Closing cost = $4,200

Now,

The maximum loan amount Robby qualifies

= 85% of $125,000

= 0.85 × $125,000

= $106,250

Thus,

Cash available

= Maximum loan amount - First mortgage - Second mortgage - Closing cost

= $106,250 - $63,000 - $5,000 - $4,200

= $34,050