The Quick Read: On the asset depletion path, the new loan can reach 60% of the property’s value, and your cash is that amount minus your existing payoff and costs, with tax return losses not entering the formula because the review rests on documented assets rather than returns.
- Losses are not in the formula. The return is not the qualifying document on either path, so a negative bottom line does not shrink the cash.
- Two paths, two answers. The asset depletion path publishes a 60% cash-out ceiling on a principal residence, a second home and an investment property, subject to underwriting.
- The qualifier path is different. Cash-out leverage there is set by the lender and is not published, so no figure belongs here.
- Your payoff comes out first. The cap applies to the total new loan, not to the cash you receive. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The rest of this page shows the math, the exceptions and the decision.
Why Tax Losses Do Not Touch the Cash Number
A tax loss and a cash shortage are different things. An asset-based mortgage is built for that profile.
Depreciation explains most of the gap. It is a deduction, not money leaving your account. Rental depreciation is reported on line 18 of the IRS Schedule E instructions, and residential rental property is depreciated over 27.5 years, per Taxstra’s depreciation guide. A rental that puts cash in your pocket can therefore still show a loss on paper. Passive-activity limits can add more paper loss on top.
A conventional full-documentation lender starts from the return. It rebuilds your income from what the return reports, then runs a debt-to-income test. A loss hurts there because it is the input.
An asset-based file works differently. On the asset qualifier path, you document no employment or income, and the lender’s review rests on your assets. On the asset depletion path, your assets are converted into a monthly qualifying income. Neither path starts from the return. Qualification is subject to underwriting, but the loss is not the gate.
Which Path Sets Your Cash?
Your cash depends on which of the two paths your file runs on. A borrower is qualified on one path at a time, and the two never blend. Here is how they compare through asset-based mortgage programs placed with select lenders.
| Factor | Asset qualifier path | Asset depletion path |
|---|---|---|
| How you qualify | Assets cover the entire loan | Assets become monthly income |
| Income documented | None | Derived from assets, runs through DTI |
| Cash-out leverage | Set by lender, not published | 60% on residence, second home, investment property |
| Purchase leverage | Up to 80% | 80% residence/second home; 65% investment |
| Refinance leverage | Up to 75% | 80% rate-and-term on residence/second home; 65% on investment |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
Read the table this way. The qualifier path is the cleaner fit when your usable assets equal or exceed the whole loan. It requires no traditional personal-income documentation, pay stubs or employment verification, though the assets themselves are fully documented with statements. It is also the path where the cash-out limit is the lender’s call, so a borrower wanting cash out should ask for that figure up front.
The depletion path is the fit when your assets are large but fall short of the loan amount. They are converted into income, and that income must carry the full housing payment and other debts. The cash-out ceiling is published here: 60% of value, whether the property is a home you live in, a second home or an investment property. That ceiling is a limit, not an offer, and the lender’s own calculation governs.
The Cash-to-You Formula
Net cash is the maximum loan minus everything the loan has to pay off or cover. The steps are the same every time.
1. Start with value. The appraised value of the property sets the base.
2. Apply the cash-out cap. On the depletion path, multiply value by 60%. That gives the maximum total loan.
3. Subtract your existing liens. The first mortgage, any second mortgage or HELOC, and any other lien secured by the property are paid from the new loan.
4. Subtract closing costs and any required items. What is left is the cash that reaches you.
5. Check the qualifying test. On the depletion path, your derived income must still carry the larger payment. A bigger loan means a bigger obligation, so the income test can limit proceeds even when equity is plentiful.
Percentages show the shape better than dollars. Say your existing mortgage equals 35% of the home’s value and the depletion cap is 60%. That leaves room for about 25% of value before costs. If your existing mortgage already sits at 60% of value or higher, a cash-out leaves nothing to take out. Equity alone does not create cash; the cap does the limiting.
Tax losses never appear in any of those five steps. A borrower with a large loss and a borrower with a large profit, holding the same property and the same assets, see the same formula.
How assets become income on the depletion path
Take a borrower holding $1,500,000 in securities and $300,000 in cash. Securities count at 80%, which is $1,200,000. Cash counts at 100%, which is $300,000. That is $1,500,000 of usable assets. Divide by 60 months and you get $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test. This is illustrative arithmetic; the lender’s own calculation governs.
What Shrinks the Cash
Several things pull the number down, and most have nothing to do with your return.
Your existing payoff. This is the largest deduction for most owners. The cap is on the whole loan.
Assets that do not count. On the depletion path, securities count at 80%, retirement accounts at 70% at any age, real-estate equity at 60%, and cash and certificates of deposit at 100%. The part that does not count is the haircut: 20% of securities and 30% of retirement accounts. On the qualifier path, brokerage, certificates of deposit, money market and savings count at 100%. Retirement accounts count at 90% under age 59½ and 100% at 59½ or older.
Assets that are not eligible at all. Privately held company stock is not an eligible asset on either path. The same applies to stock options, non-vested restricted stock units, custodial accounts, deferred compensation, escrow accounts, foreign funds and cash on hand on the depletion path. Cryptocurrency, precious metals and collectibles are not published as eligible on either path. A founder or shareholder with most of their wealth in company shares has a documented route: a sale or buyout converted into seasoned cash in a regulated account. Public securities and retirement accounts count at their percentages.
Cash-out proceeds themselves. The money you pull out cannot qualify the loan that produced it. Plan your qualifying assets as if the cash-out never happened.
Statement timing. On the qualifier path, assets need 60 days of seasoning and two months of statements per account. On the depletion path, statements must be at least 120 days old at application, plus one within 45 days. Funds from a business sale, inheritance or legal settlement are excused from that seasoning.
Minimum assets and credit. The depletion path wants 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. The qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor there needs 700. Housing history of 0x30x12 is the standard, and multiple bankruptcies are not eligible.
Key Terms Defined
Asset qualifier path: the route where eligible assets, after their credit percentages, must equal or exceed the entire loan amount.
Asset depletion path: the route where eligible assets are divided by 60 months to create a monthly qualifying income.
Cash-out refinance: a new loan larger than your payoff, with the difference paid to you.
Net cash: what reaches you after payoff, closing costs and required items come out of the new loan.
Seasoning: the length of time funds must sit in an account before they count.
Debt-to-income (DTI): your monthly debts divided by your monthly qualifying income.
Does an Investment Property Change the Picture?
Yes, in leverage. On the depletion path, an investment property carries a 65% ceiling on a purchase or rate-and-term refinance and 60% on a cash-out, versus 80% and 60% on a principal residence or second home. The cash-out ceiling matches across occupancy; the purchase ceiling does not.
Loans on investment property are business-purpose loans. Business-purpose credit is treated differently from a standard owner-occupied mortgage, and the CFPB’s Regulation Z exemptions page explains how primary purpose is judged. That is a classification point, not a shortcut. Every file is fully underwritten, and the assets are documented with statements.
If your goal is to pull cash from a rental using rent coverage rather than your assets, that is a different product.
Which Fit Are You?
Match the profile to the path before you chase a number.
Retiree living on a portfolio. Large brokerage and savings balances with little documented income often fit the qualifier path if usable assets cover the loan, or the depletion path if they do not. The 100% credit on brokerage and savings does the heavy lifting.
Business owner after a sale. Seasoned proceeds from the sale are the cleanest asset. Sale-of-business funds are excused from depletion-path seasoning, subject to the lender’s review of the source.
Early-retired professional with a retirement-heavy balance. The difference between the paths matters most here. Retirement accounts count at 90% under 59½ and 100% after on the qualifier path, but only 70% on the depletion path.
Loss filer who wants cash. Do not amend the returns, and do not stress over the loss. Gather statements, a payoff figure for the existing liens, and a clear idea of how much the cash-out cap leaves after payoff. Lendmire’s article How Lenders Underwrite an Asset-Based Cash-Out Refinance When Your Tax Returns Show a Loss walks through the review in more depth.
When Not to Cash Out
Cash-out is not always the right call, even when the file qualifies.
- Your payoff is near the cap. If the existing mortgage already sits close to 60% of value on the depletion path, the cash left after costs may not justify a new loan.
- You do not need the loan to qualify. If your assets already cover the purchase or the need, borrowing against the property adds an obligation.
- You were counting on the proceeds to qualify. Cash-out proceeds never count as qualifying assets, so they cannot rebuild the asset base that qualified you.
- You are comparing against other options. A HELOC or a rate-and-term refinance may fit better.
What to Gather Before You Apply
- Two months of statements for each qualifying account on the qualifier path.
- Statements at least 120 days old plus the most recent one on the depletion path.
- A current payoff statement for every lien on the property.
- Documentation of the source for any large recent deposit.
- A government ID and a credit review. Approval is never promised, and every file is individually underwritten.
- For private-company owners, the sale or buyout paperwork showing funds converted to cash in a regulated account.
Frequently Asked Questions
Do tax return losses reduce how much cash I can take out?
Not directly. The return is not the qualifying document on the asset-based path, so a loss does not enter the cash formula. What limits cash is value, the cash-out cap, your existing payoff, closing costs, and on the depletion path whether your derived income carries the new payment. Each file is underwritten individually.
Is there a published cash-out limit on the asset qualifier path?
No. The qualifier path publishes 80% on a purchase and 75% on a refinance for a principal residence or second home, but whether cash-out is allowed and at what leverage is set by the lender. Ask for that figure before building a plan around it.
Can my company shares count toward the assets?
It depends on the shares. Public company shares count as securities at their percentage, and retirement accounts count at theirs. Privately held shares are not eligible on either path; the route there is a documented sale or buyout, converted into a seasoned cash balance in a regulated account.
Can I use the cash I pull out to qualify the same loan?
No. Cash-out proceeds never count as qualifying assets. Your file has to stand on the assets you already hold.
Does this require no documents at all?
No. There is no traditional personal-income documentation: no pay stubs or employment verification on the qualifier path, but your assets are documented with statements, and credit, the property and the loan are reviewed in full.
Next Step
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. The program is available through select lenders in Lendmire’s network in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Programs change and every file is subject to underwriting; this is not a commitment to lend.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS Schedule E instructions
2. Taxstra’s depreciation guide
3. CFPB Regulation Z § 1026.3 exemptions
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify and Apply for an Asset-Based Cash-Out Refinance as a Retiree · Best Asset-Based Cash-Out Refinance Program Without a Mortgage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.