Final answer:
To determine the maximum amount of credit on a home equity loan, calculate the owner's equity in the house by subtracting the outstanding bank loan from its value.
Step-by-step explanation:
To determine the maximum amount of credit that can be provided on a home equity loan, you need to calculate the owner's equity in the house. Owner's equity is the value of the house minus the outstanding bank loan used to purchase it.
For example, if a house is valued at $200,000 and the outstanding bank loan is $180,000, the owner's equity would be $20,000. This means that the maximum amount of credit that can be provided on a home equity loan in this case would be $20,000.
It's important to note that the maximum amount of credit may vary depending on factors such as the market value of the house and the remaining balance on the bank loan.