ASSET DEPLETION
Refinance Options

An Asset Depletion Refinance loan is a mortgage refinancing option designed for borrowers who may not have a regular or traditional income but possess significant liquid assets. This type of refinance allows individuals to qualify for a mortgage based on their assets rather than conventional income documentation, making it particularly useful for retirees, self-employed individuals, or anyone whose income may be inconsistent or difficult to verify.

How Asset Depletion Refinance Works
In an asset depletion refinance, lenders evaluate the borrower’s liquid assets, such as savings accounts, stocks, bonds, and other investments, to determine how much income can be generated from those assets. Typically, lenders will convert the total value of the assets into a monthly income equivalent, which is then used to assess the borrower’s ability to make mortgage payments. The common approach is to divide the total liquidable asset by a number of months and that figure will be the amount considered as monthly income.

Non-Traditional Qualification
This option allows individuals to qualify for a mortgage based on their assets rather than traditional income documentation, which is beneficial for those with variable or limited incomes.

Rate and Term Refinance
A rate and term refinance focuses on changing the interest rate or the loan term of an existing mortgage without increasing the overall loan amount.

– The goal is to secure a lower interest rate to reduce monthly payments and/or to adjust the loan term for a shorter or longer period of time. 

– In this scenario, the lender uses the calculated income from the asset depletion analysis to evaluate the borrower’s ability to make the new monthly payments.

Cash-Out Refinance
A cash out refinance allows borrowers to refinance their existing mortgage for more than they currently owe and receive the difference in cash.

– The underwriter will assess the borrower’s assets to ensure they have the financial capacity to support the higher loan amount and the associated monthly payments based on the income generated from those assets.Benefits of Asset Depletion Refinance

– Cash-out can be used for various purposes, such as home improvements, debt consolidation, or other financial needs.

– Lower Interest Rates: Borrowers may access competitive interest rates typically available to conventional mortgage applicants. 

Primary Considerations
– Asset Requirements: To qualify, borrowers need to have substantial liquid assets, which may limit eligibility for those with fewer financial resources.

– Higher Interest Rates: While the rates can be competitive, they might still be higher than those for standard refinances due to the perceived risk.

– Documentation: Extensive documentation is usually required to verify the assets and their liquidity.

– Asset depletion refinance is particularly suitable for:

– Retirees who have substantial savings but may not have a regular income.

– Self-employed individuals whose income fluctuates but have significant assets.

– Individuals with substantial investments who prefer using their assets for refinancing rather than traditional income.

An asset depletion refinance provides a pathway for individuals without regular income to secure refinancing options based on their financial assets. This flexibility allows borrowers to access more favorable mortgage terms and potentially unlock cash for other needs, making it an attractive option for many.