Asset depletion loans provide an alternative financing option for individuals who have significant assets but may have limited income or non-traditional income sources. This opens up access to mortgage financing for borrowers who may not qualify for a traditional loan based on income alone. The specific guidelines for an asset depletion loan can vary among lenders, but here are some general considerations that lenders may take into account:

• Lenders will assess the borrower’s assets to determine their value and liquidity. This evaluation may include reviewing savings accounts, investment portfolios, retirement accounts, stocks, bonds, and other liquid assets. Non-liquid assets, such as real estate or personal property, will not be included in the calculation.

• Lenders may use different methods to calculate the depletion rate and estimate the income generated from the assets. Some lenders may use a fixed percentage, while others may consider the asset’s type, historical performance, and expected future returns.

• Lenders typically establish a depletion period over which they project the assets will be depleted. The duration can vary, but is often based on industry standards or lender-specific criteria. The typical depletion term ranges between 5 and 30 years. The longer the depletion period, the lower the calculated income.
• Lenders use the depletion rate and depletion period to calculate a theoretical income based on the value of the assets. This calculated income is then used to determine the borrower’s eligibility for the loan.

• Lenders will consider the loan-to-value ratio, which is the loan amount relative to the appraised value of the property being purchased. Different lenders may have varying requirements for the maximum loan-to-value ratio allowed for asset depletion loans.

• While asset depletion loans focus on assets rather than income, lenders still consider the borrower’s credit history to assess their overall creditworthiness. A strong credit history can positively impact loan eligibility and terms.

• Borrowers will likely need to provide detailed documentation of their assets, such as statements or proof of ownership, to support the loan application. Lenders may also require verification of other financial information, such as employment history or additional income sources.

• The repayment structure and loan terms, including interest rates, loan duration, and any associated fees, will be determined by the lender and the specific loan program.

These guidelines are general in nature, and the specific requirements and criteria can vary between lenders. Different lenders may have their own unique guidelines and calculations for determining loan eligibility based on assets. Therefore, it’s advisable to consult with a mortgage professional who can provide guidance specific to your situation and connect you with lenders offering asset depletion loans.