The Quick Read: The right program for your build depends on how your assets are held, which home you are borrowing against, and how much cash you need. An asset-based cash-out refinance sizes your loan on today’s appraised value, not on the finished addition or ADU, and is reviewed against assets instead of paychecks, through select programs and subject to underwriting.
- Cash-out leverage on the asset depletion path tops out at 60% on a principal residence, a second home, or an investment property.
- The asset qualifier path covers the whole loan with eligible assets. Whether it allows cash-out, and at what leverage, is set by the lender and is not published.
- The appraisal values the property as it stands. An unbuilt ADU adds nothing to your budget.
- Cash-out proceeds never count as qualifying assets.
- You document statements, not tax returns, pay stubs, or employment verification.
If you live on a portfolio, sold a business, or received an inheritance, this is the structure to understand before you hire a contractor.
What Does “Asset-Based” Actually Mean Here?
Asset-based means the lender reviews your file on what you own rather than what you earn each month. Two paths exist, and you are qualified on one path at a time.
The asset qualifier path looks at assets alone. Your eligible assets, after the credit percentages below, must equal or exceed the entire loan amount. No employment or income is documented.
The asset depletion path turns assets into income. Usable assets are divided by 60 months to create a monthly qualifying income. That income must carry the housing payment and your other debts through the debt-to-income test.
Every file is fully underwritten. Your assets are documented with statements. The point is that you show no traditional personal-income documentation, pay stubs, or employment verification. For the broader program, see Lendmire’s asset-based mortgage programs.
Can Cash-Out Proceeds Build an Addition or ADU?
Yes, in principle. A cash-out refinance replaces your current first mortgage and pays you the difference as a lump sum at closing. Stating renovation or ADU construction as the use of proceeds is normal. You should disclose it to the broker up front so the file matches the right program.
The catch is valuation. NerdWallet’s ADU financing guide explains that equity borrowing is based on the home’s value before the work. Only renovation and construction loans lend against the projected value after the ADU is ready for occupancy.
A cash-out refinance falls on the first side of that line. The appraiser values the property as it stands today. You borrow against equity you already have, not against equity the build will create.
How Underwriting Treats an Asset-Based Cash-Out, Step by Step
1. Pick the path. Your assets decide it. If eligible assets cover the whole loan, the qualifier path may fit. If your assets are large but you want them converted into income, the depletion path applies.
2. Count the assets after credit percentages. Not every dollar counts at face value. The next section shows the tables.
3. Season and document. Statements must show the money has been there. Seasoning rules differ by path.
4. Appraisal and leverage. The appraiser sets today’s value. The loan is capped at a percentage of that value.
5. Underwriting. The lender reviews credit, housing history, the property, and the assets. Subject to underwriting, funds arrive as one lump sum at closing. There are no draws and no inspections.
6. Build. You pay the contractor from your own account on whatever schedule you negotiate.
One rule trips people up. Cash-out proceeds never count as qualifying assets. You cannot borrow the money and then use it to qualify for the same loan.
What Counts as an Asset, and at What Percentage?
Keep the two tables separate. Never blend them.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Brokerage / securities | 100% | 80% |
| Cash, savings, money market | 100% | 100% |
| Certificates of deposit | 100% | 100% |
| Retirement accounts | 90% under 59½; 100% after | 70% at any age |
| Real-estate equity | Not listed | 60% |
Several asset types are not eligible on the depletion path. These include custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options, non-vested restricted stock units, and funds from non-regulated financial companies.
Privately held company stock is not an eligible asset on either path. Cryptocurrency, precious metals, collectibles, and borrowed or pledged funds are also not published as eligible. The documented route is converting them to a seasoned cash balance in a regulated account. The lender reviews the source of those funds. A founder who sold a company, for example, is reviewed on the seasoned proceeds, not on the old shares.
Leverage, Loan Size, and Seasoning
Here are the figures that shape an addition or ADU budget. All are ceilings or floors through select programs, subject to underwriting, not offers.
- Qualifier path: up to 80% loan-to-value on a purchase and 75% on a refinance of a principal residence or second home, with loans up to $4,000,000. Cash-out terms on this path are the lender’s call and are not published, so a broker has to ask.
- Depletion path, principal residence or second home: up to 80% on a purchase or rate-and-term refinance, and 60% on a cash-out refinance.
- Depletion path, investment property: up to 65% on a purchase or rate-and-term refinance, and 60% on a cash-out refinance. Loans on this path run from $125,000 to $3,500,000.
- Seasoning, qualifier path: 60 days and two months of statements per qualifying account.
- Seasoning, depletion path: statements at least 120 days old at application, plus the most recent statement within 45 days. Sale-of-business, inheritance, and legal-settlement funds are excused from that seasoning.
- Credit: the qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix. A first-time investor on the depletion path needs 700.
- Depletion minimums: qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan, and never below $250,000 liquid when assets are your only income source.
Investment property is eligible only on the depletion path. That loan is business-purpose, so it is reviewed differently from a standard owner-occupied mortgage.
A Worked Example
Picture a retiree with a large portfolio and no paycheck. Say the depletion path fits.
The portfolio holds securities at 80% credit and cash at 100%. Usable assets come to $1,500,000. Divided by 60 months, that creates $25,000 of monthly qualifying income. That income then has to carry the housing payment and other debts through the debt-to-income test.
The cash-out side is where the build gets sized. On a principal residence, the cash-out ceiling on this path is 60% loan-to-value. Subtract your current payoff, and the remainder is your potential build budget. Subtract closing costs from that as well.
On the qualifier path, a different borrower might hold brokerage accounts, a 401(k) under 59½ at 90%, and savings. If those add up to $800,000 of usable assets, an $800,000 loan can qualify on assets alone. The lender’s own calculation governs either example.
The Sequencing Problem Nobody Mentions
Your money arrives as one lump sum, but the work is paid out over months. A few habits help.
- Get contractor bids and permit status before you apply, so your budget is a real number.
- Hold the proceeds in your own account and pay on milestones.
- Plan a contingency. Overruns on additions are common. A separate home equity line is one way to cover them.
- Remember that interest runs on the entire new balance from day one, even while most of the money sits unspent.
That last point is the structural cost of a lump sum. A phased construction product lets interest build only on drawn funds.
Addition vs. ADU: How Project Type Changes the Plan
A bump-out, second story, or primary-suite addition changes the same home’s square footage. The appraisal still values the home as it stands today.
A detached ADU is a different animal. It may change the unit count, and the permit path, zoning, and insurance questions grow. On an unpermitted or unusual conversion, value and eligibility both become open questions. Permits, zoning records, and photos may need to support the legal setup.
Rent matters differently depending on the path. On the qualifier and depletion paths, your assets carry the file. Projected ADU rent is not what qualifies you. If the ADU later becomes a rental, a separate rent-based loan may refinance the finished property.
For scale, a Terner Center survey of California ADU owners put the median construction cost at $150,000, with 71 percent of ADUs under $200,000. That is a California-only snapshot from an older survey, and it should not be read as a national figure.
How Does Asset-Based Cash-Out Compare With Other Options?
| Option | Best fit | Main tradeoff |
|---|---|---|
| Asset-based cash-out | Asset-rich, income-light owners | Lump sum on today’s value |
| Standard cash-out | Borrowers with steady Traditional employment income | Needs income documentation |
| HELOC / home equity loan | Owners with a low first mortgage | Second lien; separate approval |
| Renovation loan | Thin equity, large build | Uses after-improvement value |
| Construction loan | Big detached builds | Draws and inspections |
The equity route keeps your current mortgage, while a cash-out refinance replaces it. If your existing first mortgage is cheap, compare a second-lien option against a full cash-out before you decide.
When Asset-Based Cash-Out Is the Wrong Move
Skip it, or pause, in these cases:
- Your existing first mortgage is cheap and a second lien would cover the budget.
- Your equity is thin and the build is large. A renovation or construction product credits after-improvement value.
- Your budget is small. Resetting the whole balance for a modest project rarely pays.
- You plan to sell soon. The structure favors owners who stay.
What Makes a Program the Best Fit for You?
No single program wins for everyone. The best program for your situation depends on the property type, credit profile, leverage need, and how your assets are held. A broker that shops several wholesale lenders can match the scenario to the program. Here is how a broker scores the fit:
| Criterion | Why it matters for a build |
|---|---|
| Path availability | Qualifier or depletion decides the math |
| Cash-out leverage | Sets your build budget after payoff |
| Property type | Investment property is depletion-only |
| Asset eligibility | Haircuts shrink usable assets |
| Statement seasoning | Recent transfers can stall a file |
In practice, files stall less on credit than on assets that were moved recently and cannot be traced.
Pre-Application Checklist
- Statements for every account you plan to count, with seasoning in mind.
- A current mortgage statement and the approximate payoff.
- Contractor bids and permit status.
- A credit review, since the score floor depends on the path.
- A clear answer on whether the property is your residence, a second home, or an investment.
Key Terms Defined
Asset qualifier path: the route where eligible assets cover the entire loan and no income is documented.
Asset depletion path: the route where usable assets divided by 60 months become qualifying monthly income.
Haircut: the percentage of an asset’s balance that the lender counts, such as 80% for securities on the depletion path.
Seasoning: how long funds must sit in an account, shown on statements, before they count.
As-is value: the appraised value of the property today, before any planned work.
Cash-out refinance: a new loan that replaces your current mortgage and pays you the difference.
Frequently Asked Questions
Will the appraisal include the value of my planned ADU?
No. The appraisal values the property as it stands, so an unbuilt ADU adds nothing to your budget. Only renovation and construction loans lend against projected after-improvement value.
Can I use my retirement account to qualify?
Yes, at a haircut. On the qualifier path, retirement balances count at 90% under age 59½ and 100% at 59½ or older. On the depletion path they count at 70% at any age.
Does my business stock count as an asset?
No. If you sold or converted it, the seasoned cash proceeds can count.
Can I do this on a rental property?
Only on the asset depletion path, where investment property cash-out runs up to 60% loan-to-value, subject to underwriting. The qualifier path covers a principal residence or second home.
Where is this offered?
Lendmire’s consumer mortgage lending covers 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and Washington. Lendmire is a broker, arranging loans through select lenders in its network. This is not a commitment to lend.
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.
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. Bank statement, P&L-only, 1099-only and asset-based mortgages for self-employed and high-net-worth borrowers are arranged through wholesale lenders on primary residences, second homes and investment properties; every file is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. Terner Center – ADU owner survey
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Asset-Based Cash-Out Refinance Program for a Founder Before a Liquidity Event · Best Asset-Based Cash-Out Refinance Program With Stock Options as Your Main Asset · Best Asset-Based Cash-Out Refinance Program to Fund Large Philanthropic Gifts
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.