ASSET DEPLETION
Purchase

An asset depletion mortgage loan is a type of financing designed for borrowers who may not have traditional income sources, such as salaried employment, but possess significant assets. This type of mortgage allows borrowers to qualify based on their liquid assets rather than their income. Lenders typically assess a borrower’s assets, such as savings accounts, investment accounts, and other liquid funds, to determine how much income can be “depleted” over time. This approach provides an avenue for retirees, self-employed individuals, or those with irregular income streams to secure financing for a home purchase.

In an asset depletion loan, the lender calculates a monthly income equivalent based on the borrower’s assets. For example, they might consider the total amount of liquid assets and divide it by a specific period, usually 60 months, to determine the monthly income figure. This allows borrowers to leverage their existing wealth, even if they do not receive a consistent paycheck. While this method can be advantageous for those with substantial savings, it typically requires detailed documentation of the assets and may involve a higher interest rate compared to conventional loans due to the increased risk for lenders.

Borrowers interested in an asset depletion mortgage should carefully evaluate their financial situation and consider consulting with a mortgage professional. While this type of loan can provide significant benefits for individuals lacking conventional income, it also requires a thorough understanding of how asset valuation works and the potential risks involved. Ultimately, asset depletion mortgages can be a viable solution for certain borrowers looking to secure a mortgage while capitalizing on their financial assets rather than their income streams.