What is an Asset Depletion Mortgage?
An asset depletion mortgage, also referred to as an asset-based mortgage, allows borrowers to qualify for a mortgage based on their liquid assets rather than their income. Thus, the borrower will not be required to provide tax returns when applying for the loan. An asset-based mortgage is excellent for someone who has trouble showing consistent income but has significant asset balances.
Who May Benefit from an Asset Depletion Mortgage?
This program is excellent for someone who has trouble showing consistent income but has significant asset balances. This may include:
- Self-employed borrowers who show minimal income
- A borrower with little to no income but significant assets
- A borrower who is retired or soon to be retired
What Assets are Eligible for Qualification?
Assets refer to funds that can be liquidated (converted to cash or cash equivalents) in 30 days.
- Checking or savings account funds
- Retirement account funds
How Does an Asset Depletion Mortgage Work?
Your assets will be depleted using a formula to determine a monthly cash flow, used as a monthly income reference for the loan. The mortgage underwriter will divide your total assets being used to qualify for the loan by 360 months (total number of months in a 30-year mortgage). The final number helps the underwriter evaluate your monthly liquid funds, determining what mortgage payment size you can handle each month.
Total Assets Used to Qualify / 360 = Monthly Liquid Funds
Requirements for an Asset Depletion Mortgage
The borrower must meet the following requirements to qualify for an asset-based mortgage:
- Must have at least two times the desired loan amount in assets
- For example, if you are requested a loan for $100,000, you must have at least $200,000 in assets.
- Must be of retirement age to qualify based on retirement funds
- Subject property must be a primary home, second home, or investment property
- Must have a down payment of about 20-40% of the purchase price
- Must have a strong credit score
Why Choose GuardHill?
GuardHill has over 29 years of mortgage financing experience and specializes in providing standard and out-of-the-box financing solutions for our customers. GuardHill works with numerous investors and lenders and offers various loan programs to provide borrowers with the best financing solutions possible.