A refinance transaction involves a property worth $500,000. The existing first mortgage balance is $350,000 and the borrower wants to take cash out, creating a new loan of $400,000. What is the LTV ratio?
Correct Answer
C) 80%
In a refinance, LTV is calculated using the new loan amount divided by the current property value. $400,000 ÷ $500,000 = 80%. The existing mortgage balance is not used in this calculation; only the new loan amount and current property value matter.
Why This Is the Correct Answer
In a refinance, LTV is calculated using the new loan amount divided by the current property value. $400,000 ÷ $500,000 = 80%. The existing mortgage balance is not used in this calculation; only the new loan amount and current property value matter.
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