The Quick Read: You refinance a pledged asset line (PAL) by applying for a new first-lien super jumbo loan, qualified on 12 or 24 months of bank statements, whose proceeds pay off the line and release your portfolio, then choosing interest-only or fixed based on your hold period and how much payment step-up your deposits can absorb. A PAL is a revolving credit line secured by your brokerage account. It is not a mortgage, so no streamline path exists. Everything below is available through select wholesale programs, subject to full underwriting, and none of it is a commitment to lend.
- New loan, not a conversion. The mortgage proceeds retire the line, and the securities firm then releases the pledge on your portfolio.
- Income comes from deposits. Lenders use 12 or 24 months of personal or business statements after an expense ratio. Draws on the PAL itself do not count as earnings.
- Size is wide, leverage is not. Loan amounts run from $300,000 to $30,000,000 across two wholesale programs, and everything above $4,000,000 is reviewed case by case.
- Interest-only is a payment structure. The portfolio non-QM program allows it to 85% LTV on a purchase or rate-and-term refinance. It never raises a cash-out ceiling.
- Classification matters. Some lenders treat a PAL payoff as rate-and-term and others as cash-out. Confirm which before you pick a structure. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
What a PAL Is, and Why Borrowers Refinance Out of One
A PAL is a loan against your securities, and that makes it fragile. FINRA’s investor explainer describes these lines as non-purpose loans. You can spend the money on almost anything except buying or trading securities. The name also confuses people: a PAL has nothing to do with down-payment assistance.
The weak point is the maintenance call. If your pledged holdings fall too far, you typically get two or three days to post more collateral or repay. If you can’t, the firm can sell your securities. The firm can also decide a holding no longer qualifies as collateral, which cuts your limit without any market crash. The SEC and FINRA investor alert on Investor.gov adds that these are demand loans, so the lender may call them at any time.
A mortgage secured by real estate has no market-value trigger. That is the whole case for refinancing: you trade demand debt for scheduled debt, and your portfolio stops being collateral.
Key Terms Defined
- PAL (pledged asset line): a revolving credit line secured by a brokerage portfolio instead of by real estate.
- Super jumbo: a market term for loans large enough that lenders tighten their rules. No single federal definition exists.
- Bank statement income: income calculated from 12 or 24 months of deposits instead of traditional personal-income documentation.
- Expense ratio: the share of business deposits the lender treats as operating cost before counting the rest as income.
- Interest-only period: the stretch where you pay only interest, before payments begin to include principal.
- Rate-and-term refinance: a new loan that replaces old debt without paying you extra cash.
- Cash-out refinance: a new loan that pays off old debt and puts cash in your hands, at lower leverage ceilings.
How Underwriting Treats the PAL Payoff, Step by Step
The sequence below is how the wholesale network handles these files. Details shift by program.
1. Get the payoff package. Request the balance, accrued interest and pledge agreement. The firm’s lien sits on your portfolio, not your home, so check separately whether anything is recorded against the property.
2. Settle the purpose. What the PAL funded, a purchase, a renovation or other uses, drives whether the payoff reads as rate-and-term or cash-out. Lenders differ, so ask before you apply.
3. Pick the income channel. Choose personal statements, business statements or a mix, over 12 or 24 months. The bank portfolio program uses 12.
4. Prove reserves separately. Statements that prove income do not prove reserves. If your portfolio is still pledged, expect the lender to net the line against it when counting assets.
5. Choose the structure. Interest-only or fixed, covered below.
6. Appraise and review. A full appraisal comes first. Loans above $4,000,000 get case-by-case review before submission.
7. Fund and release. Proceeds go to the securities firm, and the pledge is released afterward. Keep the line open until the payoff is wired, so a margin event cannot catch you in the gap.
How Bank Statement Income Works for a PAL Borrower
Qualifying income is eligible deposits divided by the statement months, after an expense ratio. Business statements require at least 25% ownership. The fixed ratios are 20% for a service business with no employees, 40% for one to five employees, and 50% for six or more employees or any product business. An accountant-provided ratio is another path, and a profit-and-loss method exists too. Statements must be consecutive, and transaction histories never substitute.
Picture a founder whose operating account sends a transfer to her personal account every month. Those transfers from the borrower’s own business count at 100%. Now add a PAL borrower’s usual clutter: line advances landing in checking, portfolio liquidations, moves between brokerage and bank. That is borrowed or moved money, not earnings, so expect an underwriter to pull it out. Clean the file up before it goes in, and label large deposits.
Credit and ratios matter too. Debt-to-income can run to 50%. Reserves are 3 months up to $500,000, 6 months up to $1,500,000 and 9 months above that, plus 2 months per additional financed property to a 12-month maximum. First-time investors need 12 months.
If statements are thin, asset paths exist on primary and second homes. An asset allowance divides liquid assets by 36, 60 or 84 months. Assets-only qualification needs U.S. liquid assets equal to the loan plus closing costs. Retirement accounts count at 70%, or 80% at age 59.5 and over. Business funds, gifts, unvested stock and cryptocurrency never count.
Size and Leverage: What the Ladder Allows
Two wholesale programs cover the range. The portfolio non-QM program carries files to $6,000,000. The bank portfolio program carries twelve-month-statement files to $30,000,000 on its own ladder, which begins above $4,000,000 and overlaps the first program to $6,000,000. Credit floors are 660 on the portfolio program, 680 on the bank portfolio program, and 700 above the super-jumbo line. Those are floors. The credit figure in each band below is what that band’s top leverage needs, and a lower score takes a lower cell in the same band.
| Occupancy and size | Rate-and-term | Cash-out | Credit for this leverage |
|---|---|---|---|
| Primary, $300K–$1M | 90% | 80% | 680+ |
| Investment, $1M–$1.5M | 80% | 75% | 680+ |
| Primary, $2M–$2.5M | 80% | 70% | 720+ |
| Investment, $3M–$3.5M (portfolio program, super-jumbo overlays) | 60% | 55% | 700+ floor applies |
| Primary, $3.5M–$4M (portfolio, super-jumbo overlays) | 70% | 65% | 760+ |
| Primary, $4M–$5M (bank program, on review) | 65% | 60% | 700+ floor applies |
Every figure is a ceiling through select wholesale programs, subject to full underwriting. Above $4,000,000, read each one as case by case. Above $3,500,000 on a primary residence, and $3,000,000 on a second home or investment property, super-jumbo overlays apply. They include a 700 credit floor, 0x30x24 housing history, 48-month seasoning on any credit event and U.S. citizen or permanent resident status. Cash-out proceeds cannot satisfy reserves there.
If the payoff reads as cash-out, you are in the third column, typically 5 to 10 points lower in the bands above. Cash-out is unlimited at or below 60% LTV. Above 60%, the portfolio program caps cash in hand at $1,500,000, and the bank program publishes no cap.
Interest-Only or Fixed?
Interest-only lowers the required payment during the interest-only window. It does not raise leverage on a cash-out file. On the portfolio program it runs to 85% LTV on purchase and rate-and-term files, with a 700 credit floor, on a 40-year term with a 10-year interest-only period. When that period ends, payments begin to amortize the balance over the remaining 30 years. On the bank program, interest-only tops out at 60% LTV, or the band’s ceiling if lower, on 5- and 7-year fixed-period adjustables. Its 10-year fixed-period adjustable is fully amortizing. Fixed, fully amortizing options exist across the network, and terms vary by program.
| Factor | Interest-only | Fixed, amortizing |
|---|---|---|
| Hold period | Shorter, with a planned exit | Long-term hold |
| Cash-flow priority | Lowest early payment | Steady, falling balance |
| Exit plan | Sale or refinance before reset | Less exit pressure |
| Reserves | Keep extra for the step-up | Lean on a stable payment |
| Step-up tolerance | Must absorb a payment jump | None |
This is a judgment call. If your deposits are strong and you plan to sell or refinance within the interest-only window, interest-only fits. If the point of leaving the PAL was certainty, fixed matches that goal better.
Stress-test either structure the same way. Divide your qualifying monthly income by the post-reset payment and see whether the ratio still holds with room to spare.
Where the General Rule Breaks
A call mid-process. The PAL contract controls, not the mortgage file. The firm can cut your limit or demand repayment while your new loan is still in review. Many borrowers lower the balance first.
Business-purpose collateral. Investment-property super jumbos are designed for non-owner-occupied properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
Rental properties. An investment property can qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide explains that path. Whether it reaches a given loan size depends on the program.
Entity vesting. If title sits in an LLC, whether personal or business statements work depends on program guidelines.
Prepayment terms. The PAL itself usually has none, but business-purpose loans can carry them. Ask before you lock a structure.
Retirement assets. They generally cannot be pledged to a PAL, but they count toward lender assets at the haircuts above.
Your Alternatives
| Option | What it solves | Main catch |
|---|---|---|
| Stay in the PAL | No new closing | Call risk stays |
| Sell the securities | Debt disappears | You give up the holdings |
| Home equity line | Different collateral | Lien on the home |
| DSCR loan on a rental | Property income qualifies | Sizes vary by program |
| Bank statement super jumbo | Term debt, portfolio freed | New underwriting, reserves |
Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
Who Should Skip This
Skip it if you will sell the property soon, because costs may outweigh the benefit of leaving the line. Skip it if your statements are dominated by transfers and advances with little operating income behind them. It can also be the wrong move if the PAL balance is small relative to the portfolio and the call risk is remote. Finally, if you cannot meet the 9-month reserve tier at larger sizes without leaning on the pledged portfolio, fix that first.
Pre-Application Checklist
- PAL payoff letter, pledge agreement and current balance
- 12 or 24 consecutive months of personal or business statements
- Ownership proof for business accounts (25% or more)
- An accountant’s expense ratio, if you want to use one
- Brokerage and bank statements for reserves, showing what is still pledged
- A short note explaining large deposits and PAL advances
- Property details and vesting (individual or entity)
Frequently Asked Questions
Is a PAL payoff rate-and-term or cash-out?
It depends on the lender and on what the line funded. A line secured by securities, not the home, can be read either way. Cash-out ceilings sit lower, so get the classification confirmed before you choose a structure.
Can my pledged portfolio count as reserves afterward?
Yes, once the pledge is released. Until then, expect the lender to net the line against those assets. Reserves are 3, 6 or 9 months by loan size, and cash-out proceeds cannot satisfy reserves above the super-jumbo overlay line.
Do PAL advances count as bank statement income?
No. Advances and portfolio transfers are borrowed or moved money, not earnings, and underwriters typically exclude them. Transfers from your own business into a personal account do count in full.
Can I use this on a rental property?
Often, yes, through select wholesale programs, with investment-property leverage ladders that are separate from primary-residence ones. Above $4,000,000, every figure is case by case.
What happens when the interest-only period ends?
On the portfolio program’s 40-year term, payments begin amortizing over the remaining 30 years after the 10-year interest-only period. Plan for that step-up before you choose, and keep a sale or refinance as a backup.
Next Step
If you are financing a high-balance property on business or personal bank statements and want to see how the numbers work, Lendmire can help you compare super jumbo bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals. Consumer mortgage lending is licensed in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA and WA. Retiring a margin-sensitive line is a decision to make while your portfolio is still strong.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending partners for borrowers whose traditional personal-income documentation understates their income, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Investor.gov: SEC/FINRA Investor Alert
This article is part of Lendmire’s super jumbo bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify for a Super Jumbo Bank Statement Loan in California · Can You Get a Super Jumbo Bank Statement Loan After a Business Sale? · How to Document a Super Jumbo Bank Statement Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.