a. The market value of your house is $175,000 and you have a first mortgage balance of $100,000. If a lender requires a 80% loan-to-market value ratio, how large could your home equity loan be?
b. Isabelle (a single taxpayer) contributes $6,000 annually to her church. In addition, she owns a home in which she has $20,000 equity, and she itemizes deductions. If she pays $1,000 interest on credit cards, $6,000 interest on her home equity loan, and is in the 26% marginal tax bracket, calculate Isabelle's tax savings from these interest payments.