Asset Depletion Loan Calculator : While asset reduction loans can be used by borrowers with traditional sources of income, they are commonly used by retirees or those who receive their income from alternative sources. Asset depletion home loan is a type of mortgage that allows you to use the value of your liquid assets like stocks and bonds to qualify as income.
Keep in mind that if you sell one of the properties used to qualify for a home loan before closing the deal on your home purchase, you will be able to use that property to qualify for this type of mortgage. You may lose some or all of your right to use. It is important to note that using this loan will require a larger upfront payment than a traditional mortgage.
If you’re considering purchasing a home with an asset depletion loan, be sure to talk to an experienced lender before making any final decisions about which home loan program may or may not work best for you.
Borrowers who have liquid assets but no verifiable income
In other words, these borrowers typically do not receive a W2 salary but rather have a large amount of liquid assets to use for financing purposes. Asset depletion home loan is a type of financing that can be used for borrowers who have liquid assets but no verifiable income.
Asset Depreciation Loan. Instead, you have to prove that your income flow will continue even after the loan has been fully repaid. Otherwise, you may find yourself upside down on another property due to interest rate resets and subsequent higher payments over time (unless your income increases). They are similar to cash-out refinance loans in that they allow you to access the equity in your home by withdrawing more than the amount needed for a purchase or renovation project. Still, unlike a cash-out refinance, there is no principal reduction.
What is a property deficiency mortgage?
Instead of a type of asset-based lending, asset-based mortgages don’t use your property as collateral. An asset reduction mortgage, also known as an asset-based home loan, is a type of mortgage loan that allows you to qualify by using your property as income. Other lenders convert your assets into income to determine whether you have enough money to repay the loan.
If you don’t qualify for a traditional home loan, an asset reduction mortgage may be right for you. Asset reduction mortgages do not require proof of employment income, which some borrowers may not have. For example, if you’re self-employed and looking for a mortgage, you don’t have pay stubs or W-2s, and your tax returns probably don’t reflect the true state of your finances.
These types of home loans can benefit individuals who do not have a regular source of income or the documents required for a traditional loan. The asset reduction loan is also a retirement mortgage option because you can qualify using your bank and retirement accounts.
How does an asset reduction mortgage work?
Property reduction loans let you pay off your mortgage by reducing your property. You can only use liquid assets to qualify for a home loan, so your car, high-end art, and other expensive assets you own are not eligible.
With an asset depreciation mortgage, you borrow against your liquid assets, which can include:
- Bank accounts (checking and savings)
- Certificate of Deposit (CD)
- Retirement and investment accounts (stocks, bonds and mutual funds)
- money market accounts
There are some limits on the amount of your assets you can use to qualify for the loan. You can use 70% of your retirement assets, 80% of the remaining value of stocks and bonds, and 100% of your checking, savings and money market accounts. So, if you have $1,000,000 in your retirement and investment accounts and $500,000 in your checking and savings accounts, you can use $1,200,000 in assets to qualify for the asset reduction loan.
Once the lender determines your asset reduction mortgage eligibility, they can calculate the loan amount by determining your monthly income based on the loan terms.