To calculate deposit collateral for existing home loans at Bank of America in Chicago, follow these steps: First, determine the property’s current appraised value using Bank of America’s approved appraisal methods. Second, subtract the outstanding loan balance from this value to calculate the equity. Third, if the loan-to-value (LTV) ratio exceeds 80%, private mortgage insurance (PMI) may be required, which affects the effective collateral. For example, a $300,000 property with a $240,000 loan balance has $60,000 equity. If the LTV is 80%, the maximum loan amount is $240,000, so any additional deposit must maintain this ratio.

The process ensures lenders mitigate risk by aligning loan amounts with property value. Data from Bank of America’s 2023 guidelines shows 80% LTV limits for conforming loans, requiring at least 20% equity. In Chicago, median home prices were $535,000 in Q2 2023 (Federal Housing Finance Agency), meaning a $535,000 property requires a $107,000 equity buffer for an 80% LTV. If a borrower’s existing loan is $428,000, they must deposit at least $107,000 to refinance without PMI. This aligns with Fannie Mae’s conforming loan standards, which mandate LTV ratios ≤80% for non-conventional loans. Bank of America’s Chicago branch enforces these rules to comply with regulatory requirements and reduce default risks. Historical data from the Urban Institute (2022) indicates that loans exceeding 80% LTV have 50% higher default rates, underscoring the need for strict collateral calculations. Thus, deposit collateral calculations balance risk management with borrower eligibility.