ASSET DEPLETION
Rate and Term Refinance

An asset depletion rate and term refinance is a type of mortgage refinancing where a borrower qualifies based on their liquid assets rather than a steady income, specifically to improve the terms of an existing mortgage. This approach can be beneficial for borrowers with significant savings or investments but limited or irregular income.

Asset-Based Qualification
Rather than using traditional income verification, lenders calculate an income based on the borrower’s liquid assets (such as cash, stocks, bonds, or retirement accounts).

– The lender divides these assets by a set number of months (between 60 and 360) to determine a monthly income figure. For example, if a borrower has $1 million in qualifying assets, the lender would calculate a monthly income by dividing $1,000,000 by 60, resulting in a monthly income of $16,666.

Purpose
This type of refinance is specifically for improving the loan terms, such as reducing the interest rate, changing the loan duration, or switching from an adjustable-rate to a fixed-rate mortgage.

– It does not provide cash-out access to home equity but focuses solely on modifying the interest rate or loan term.

Eligible Borrowers
Commonly used by retirees, high-net-worth individuals, or self-employed individuals who may not have a consistent income stream but have substantial liquid assets.

– It can also help those who might not meet traditional income requirements but can demonstrate sufficient financial strength through their assets.

Advantages
Allows borrowers to potentially lower their monthly payments or secure a more favorable rate based on their assets alone.

– This program can provide long term savings by reducing interest rates or shortening the loan term.

An asset depletion rate-and-term refinance provides a pathway for individuals with substantial assets, but limited or nontraditional income to refinance their mortgage without relying on regular income verification. This type of refinance leverages the borrower’s liquid assets to calculate a qualifying income,  allowing them to secure more favorable loan terms; such as a lower interest rate or a different loan term, based solely on their asset strength.