The Quick Read: No. On the asset depletion path, cash-out proceeds never count as qualifying assets, because they are loan money created by the same transaction the lender is underwriting, and the same logic keeps them out of reserves.
- The depletion path converts the borrower’s own seasoned assets into monthly income by dividing usable assets by 60 months.
- Cash-out leverage on that path tops out at 60% on a principal residence, second home or investment property, subject to underwriting.
- A bigger cash-out raises the loan and the payment without raising qualifying income.
- Cash that has already landed and seasoned in your account is a different question, covered below.
- The asset qualifier path is a separate lane, and its cash-out terms are set by the lender and not published.
Across the wholesale network where Lendmire places asset-based files, this is one of the most common misunderstandings. Borrowers with large equity and thin documented income hope to borrow against the house and then count the cash as the assets that qualify them. The structure doesn’t work that way.
How Is the Asset Pool Built on a Depletion Refinance?
The pool holds only the borrower’s own verified balances, discounted by asset type. On the depletion path, cash and certificates of deposit count at 100%, securities at 80%, private stock at 75%, retirement accounts at 70% at any age, and real-estate equity at 60%, subject to underwriting.
The sequence runs like this:
1. The lender totals the eligible accounts and applies the percentage for each asset class. 2. Ineligible items come out. Custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units don’t count on this path. 3. Statements get reviewed. The depletion path wants statements covering a documented history at application, plus a recent statement, with exact timing requirements varying by file and lender. 4. The usable total is divided by 60 months to produce monthly qualifying income. 5. That income is tested against the new housing payment and other debts through the debt-to-income test.
The loan itself must also clear a minimum-assets test: qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when asset depletion is the only income source. When asset income only supplements documented income, up to a 45% debt-to-income ratio, that minimum-assets rule is waived.
Nothing in that sequence has a slot for money the new loan generates. The pool is assembled from what the borrower already owns.
Three Questions That Get Blurred Together
Online answers to this topic mix up three separate questions. Each has its own answer, and they interact.
| Question | Treatment on the depletion path | Reason |
|---|---|---|
| Do proceeds count in the income pool? | No | Borrowed money from this loan |
| Do proceeds count toward reserves? | No | Same source, same logic |
| Can proceeds fund closing costs? | Cash to close is settled in the transaction itself | It is a use of loan funds, not a qualifying asset |
Proceeds as pool assets
Never. The pool is the engine that produces qualifying income, and the program parameters state plainly that cash-out proceeds never count as qualifying assets. Counting them would let the loan prop up its own qualification.
Proceeds as reserves
Same answer. The depletion path publishes no reserve months, but a lender reviewing a file will not treat the new loan’s own cash as the cushion behind that loan. Whatever liquidity a lender looks for has to come from the borrower’s own seasoned balances.
Proceeds as closing funds
Cash-out refinances routinely pay closing costs and payoffs out of the loan amount, and that is an ordinary part of the transaction. But paying costs out of proceeds doesn’t add anything to the asset pool. If the borrower’s own cash is needed to close, that cash leaves the pool and reduces the income it produces.
Why Does the Rule Exist?
The reasoning is circular-funding risk. If a $1,000,000 loan could create $200,000 of cash that then counted as assets supporting the same loan, qualification would grow with the loan size. Lenders want the repayment evidence to exist independently of the debt being requested.
The federal framework points the same direction, though it doesn’t spell this exact case out. The CFPB’s ability-to-repay rule in Regulation Z requires a lender to consider the borrower’s income or assets other than the value of the dwelling that secures the loan, and to verify what it relies on with third-party records. Cornell’s copy of 12 CFR 1026.43 reproduces the same text. Cash-out proceeds are home equity converted into cash by the new loan. The rule doesn’t mention them by name, so the exclusion is a program overlay built on that principle rather than a federal ban. The rule also sets no divisor, haircut or seasoning period; those come from the program.
A Worked Before-and-After
Run the numbers on a retiree holding $1,500,000 in securities and $300,000 in cash, using the same percentages the program applies.
Without proceeds in the pool: securities at 80% count $1,200,000, cash at 100% counts $300,000. Usable assets are $1,500,000, divided by 60 months, for $25,000 of monthly qualifying income. That income must carry the full housing payment and other debts through the debt-to-income test.
If the borrower tried to add cash-out proceeds: the pool wouldn’t change, because the proceeds never count. What does change is the loan. A larger cash-out raises the balance and the payment while qualifying income stays at $25,000.
| Scenario | Qualifying income | Loan balance and payment |
|---|---|---|
| Rate-and-term, no cash taken | Unchanged | Lower |
| Cash-out taken | Unchanged | Higher |
That is the practical sting. Asking for more cash tightens the ratio test instead of helping it. This arithmetic is illustrative, and the lender’s own calculation governs.
What If the Money Is Already in Your Account?
Cash that has already closed, landed in your account and seasoned is a real asset, not a proceeds line. A later, separate file may count it, subject to that lender’s seasoning rules. On the depletion path that means the statement-age requirements above, which vary by lender and by file. Leftover cash from an earlier refinance shows up as a large deposit, and the lender will want it sourced. The closing statement from that earlier loan usually explains it.
Within the same transaction, the answer stays no. A seasoned balance from an earlier, completed loan is a different case from proceeds on the loan being underwritten now. How a given lender treats cash-out from a different property is a program-specific question, so confirm it on your own file.
Lendmire’s piece Can Cash-Out Refinance Proceeds Count as Reserves on a Second Home? covers the reserves side of this in more depth.
Why You’ll See Conflicting Answers Online
Treatment isn’t uniform across the market. Asset depletion is a qualification method, not a single loan product, so divisors, haircuts and transaction limits differ by lender. Some pages flatly say proceeds are excluded, some say it depends on the program, and some calculators suggest proceeds above the payoffs may count toward eligible assets or reserves.
Across the wholesale network, the strictest overlays exclude proceeds from everything, and the pattern is consistent: funds tied to the transaction being originated don’t count as the borrower’s own capacity to repay it. The parameters above describe the depletion path only. The asset qualifier path has its own table, and it should never be blended with this one.
What Are the Alternatives When Proceeds Can’t Count?
The real fix is restructuring around what does count. Investors and retirees typically have a few levers:
- Take less cash out. On the depletion path, leverage is capped at 60% on a cash-out and as high as 80% on a principal residence or second home rate-and-term refinance, with investment property at 65% on a rate-and-term and 60% on a cash-out. A rate-and-term structure leaves the loan smaller against the same income.
- Use the asset qualifier path. It is reviewed on assets alone: eligible assets, after the credit percentages, must equal or exceed the entire loan amount, with no income documented. Brokerage, certificates of deposit, money market and savings count at 100%, and retirement accounts at 90% under 59½ and 100% at 59½ or older. Whether cash-out is allowed there, and at what leverage, is set by the lender and isn’t published. Refinances on that path go up to 75% loan-to-value, subject to underwriting.
- Combine with documented income. Asset-derived income may supplement documented income up to a 45% debt-to-income ratio.
- Consider property-level qualification. For a rental, a business-purpose DSCR loan is reviewed on whether the property’s rent covers the payment rather than on borrower income, so a rental owner with weak income documentation may not need the asset path at all. Passing the coverage test doesn’t prove a property cash-flows, though.
For the broader picture, see Lendmire’s complete DSCR loans guide.
What Happens After Closing?
A cash-out refinance moves liquidity out of the property and into your hands, but it also raises the monthly obligation. Qualifying income doesn’t rise with it. On the next application, any unspent proceeds sitting in an account will be reviewed as a source-of-funds question, and a lender evaluating you again will count only what has seasoned under its own rules. Spending the cash first doesn’t change the current file. It simply means there is less to season for the next one.
Key Terms Defined
Asset depletion: a qualification method that turns usable assets into monthly income by dividing them over a set number of months, 60 on this program path.
Cash-out proceeds: the money you receive from a refinance after the old loan and costs are paid off.
Qualifying asset pool: the verified balances a lender counts after applying percentages by asset type.
Seasoning: the length of time funds have been in your account, shown by statements.
Asset qualifier path: the separate lane in which assets alone must cover the whole loan amount.
Mistakes to Avoid
- Counting home equity as an asset. Real-estate equity is counted at 60% on the depletion path, and it can’t be the dwelling securing the loan.
- Treating proceeds as income. They are borrowed money.
- Mixing the two paths. A borrower is qualified on one path at a time.
- Moving large deposits around without paper trails before applying.
- Assuming a calculator’s answer overrides the lender’s own treatment.
Questions to Ask Your Lender
1. Does this program exclude cash-out proceeds from the asset pool and from reserves?
2. Which path is my file on, and what is the leverage on a cash-out?
3. What are the asset percentages for each account I hold?
4. How old do my statements need to be?
5. What does the minimum-assets test require on my loan size?
Frequently Asked Questions
Can I use cash-out proceeds for closing costs on an asset depletion refinance?
Costs are commonly paid through the transaction itself, which is a use of loan funds. It doesn’t add to the qualifying asset pool, so it doesn’t help you qualify.
Do I have to sell my investments to qualify?
No. The assets stay in your accounts. The lender counts a percentage of their balance and spreads it over 60 months to derive income.
What if I spend the cash first?
Spending doesn’t change the current file, since the proceeds never counted. For a later file, only balances that have seasoned under that lender’s rules are reviewed.
Can I do a cash-out at all on the depletion path?
Yes, subject to underwriting, at up to 60% loan-to-value on a principal residence, second home or investment property. The loan must also meet the minimum-assets and debt-to-income tests.
What documents will the lender ask for?
Asset statements for every qualifying account, plus sourcing for any large deposits. Assets are always documented on both paths; only income documentation changes.
If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals. Consumer lending is available in 16 states through select programs, and terms are subject to underwriting; this is not a commitment to lend.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Cornell LII, 12 CFR 1026.43
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Retiree’s Asset Depletion Funds Count as Jumbo Loan Reserves? · How an Asset Depletion Mortgage Works · How Lenders Count Assets Toward an Asset Depletion Mortgage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.