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3 July, 00:50

A property is purchased for $200,000 with an 80 percent LTV. After five years, the owner's equity is $80,000. What would be the approximate annual expected appreciation rate on home equity (annual EAHE) ?

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  1. 3 July, 01:46
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    The answer is 14.9%

    Explanation:

    Purchase price = $200,000

    Loan-to-value (LTV) = 80%

    Number of years = 5 years

    Owner's equity = $80,000.

    Loan amount = purchase price x LTV

    =$200,000 x 80%

    =$160,000.

    Annual expected appreciation rate on home equity =

    (Loan:equity) ^-n

    $160,000/$80,000^-5

    =14.9%

    Therefore, Annual expected appreciation rate on home equity is 14.9%
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