The Quick Read: Asset depletion lets a retiree qualify for a large cash-out by converting investable assets into monthly qualifying income. The lender totals your eligible accounts, subtracts what the loan itself consumes, divides the rest over a set number of months, and tests that income against the new payment. Nothing is sold, and your portfolio stays invested. Cash-out eligibility, leverage and occupancy rules differ sharply from lender to lender, so the program you pick decides the outcome.
- The divisor (the number of months the lender spreads your assets over) moves the result more than any other input.
- Retirement accounts usually count at a partial value, and your age shapes that discount.
- On an owner-occupied primary residence, asset-depletion qualification runs to about 80% LTV, and a cash-out typically lands at or below that.
- The dollars that qualify you cannot also pay for closing costs or reserves.
What Is Asset Depletion, and What Isn’t It?
Asset depletion is a way of calculating income. It is not a loan product. The loan underneath is a non-QM mortgage, meaning it falls outside the standard rules for agency-style loans, and each lender writes its own asset-depletion math.
Retirees run into a familiar problem. A seven-figure portfolio with no paycheck looks like zero income on a standard application. Asset depletion fixes the paperwork, not the wealth. The lender treats your assets as if you would draw them down over a fixed period, and that imputed income goes into the file.
Across the wholesale network Lendmire works with, the pattern is consistent. The file is reviewed on documented income under the applicable program, subject to lender guidelines. In this case, the documented income comes from your account statements instead of a W-2.
Why Do Retirees Hit an Income Wall on a Jumbo Cash-Out?
Retirees hit the wall because their wealth sits in accounts, not paychecks. Home equity does not count as an asset for this method, so a paid-down house adds nothing to the income calculation. The portfolio has to carry the file.
A jumbo loan is one above the conforming limit. NAHB reports the current baseline limit at $832,750, and Orrick reports a high-cost-area ceiling of $1,249,125 for one-unit properties. Anything above your county’s limit is jumbo. Lendmire’s network places loans from roughly $125,000 to $3,500,000, subject to lender guidelines.
Bigger loans mean tighter scrutiny. Lenders want larger reserves, stronger credit and clearer asset trails as the balance climbs.
How Does the Math Work, Step by Step?
The math follows six steps, and the same sequence shows up across most programs.
1. Inventory eligible assets. Cash, brokerage accounts and vested retirement accounts usually qualify. Unvested stock, pledged or borrowed funds, and accounts you cannot access usually do not.
2. Apply haircuts. Volatile or tax-burdened assets count at a fraction of face value. Cash typically counts in full.
3. Subtract what the loan consumes. Lenders set aside funds for closing costs and reserves. A cash-out has no down payment, but many programs still net out those two items.
4. Divide by the divisor. The remainder, spread over the program’s number of months, becomes monthly income.
5. Test the income. That income goes against the new housing payment and your other debts. Some programs skip this test and instead require the assets to cover the loan, costs and reserves outright.
6. Verify and appraise. Expect recent statements for each account, ownership proof and an explanation for any large deposit. The property is appraised and capped by LTV like any other.
Here is a unitless example. Say your usable assets, after haircuts and deductions, equal 100 units, and a program divides by 100 months. That produces 1 unit of monthly income. A program that divides by 200 months produces half of that from the same portfolio. Divisors across the market range from a few years to as long as three decades, which is why the same portfolio can qualify at one lender and fail at another.
Now a failing case. A retiree holds most wealth in a single IRA, the lender counts it at a partial value, and the divisor is long. Income comes out thin, and the new payment on a large cash-out swamps it. A shorter divisor or more liquid assets might fix that, but only at a different lender.
Which Assets Count, and How Are They Treated?
Treatment follows how easy an asset is to reach and how much tax erodes it. Exact discounts are program-specific, so confirm them on the program sheet.
| Asset type | Typical treatment | Caveat |
|---|---|---|
| Cash and savings | Counts in full | Large deposits need sourcing |
| Brokerage accounts | Partial value | Volatility drives the discount |
| Vested retirement accounts | Partial value | Age and access matter |
| Home equity | Does not count | Property securing the loan is excluded |
| Pledged or unvested assets | Usually excluded | Must be yours and accessible |
How Does a Cash-Out Change the Picture?
A cash-out tightens the rules, and this is where the general answer breaks. Some asset-depletion programs allow cash-out at lower leverage. Others limit the path to purchase or rate-and-term refinances. Occupancy matters too, since many paths target primary and second homes.
Here are the leverage figures in our network, each tied to its occupancy. Asset-depletion qualification on a primary residence runs to about 80% LTV. On an investment property, a cash-out tops out around 75% LTV. Loan size and credit pull these figures down, and stronger files earn the top of each range.
Occupancy also decides the disclosure regime. An owner-occupied cash-out is a consumer mortgage, so consumer disclosure rules apply to it. The Ability-to-Repay rule requires a reasonable, good-faith determination that you can repay, and it allows a lender to weigh income or assets. That is the regulatory footing for asset depletion, and each lender writes its own policy inside it. A cash-out on a non-owner-occupied rental is a business-purpose loan and exempt from those consumer disclosures.
If you hold the rental and not your home, that second route may fit better, as the comparison below shows.
Why Can’t the Same Dollars Do Two Jobs?
The assets that generate your qualifying income cannot also be your reserves or your closing funds. Reserves are cash left after the loan closes, commonly around six months of the housing payment in our network.
Picture two investors with identical portfolios. One counts everything toward income and then discovers there is no cash left for reserves. The other sets aside the reserve pool first and is reviewed on what remains. The second file is stronger, even though it shows less income. Whether cash-out proceeds can count toward reserves depends on the program.
Retirement Accounts: Does Age Change the Math?
Age matters because of how retirement withdrawals are taxed. The IRS treats withdrawals before age 59½ as early distributions carrying an extra 10% tax unless an exception applies, and exceptions differ by plan type. Lenders mirror that logic in their discounts.
A borrower past 59½ generally faces no extra 10% tax. That is why the discount on retirement funds is often smaller or simpler for retirees. If you already draw steady IRA or 401(k) distributions, some programs let you document those as income instead of using depletion. Tax treatment varies, so consult a qualified professional before relying on any of this.
Can You Carry the Loan With No Paycheck?
The lender’s test is one question. Yours is another: can you live with a larger balance and a larger payment after closing?
Run your own stress test before applying. List fixed income such as Social Security or a pension. Add a realistic draw from the portfolio. Then check whether the new payment leaves a cushion if markets fall. A cash-out that looks fine on paper can still strain a retiree whose portfolio drops while the payment stays fixed. That is a risk to size, not a reason to avoid the loan.
How Does Asset Depletion Compare With the Alternatives?
Asset depletion is one of several routes, and the right one depends on what you own and how you want the file read.
| Option | What qualifies you | Best fit |
|---|---|---|
| Asset depletion | Your assets, converted to income | Big portfolio, thin income |
| DSCR loan | The rental’s income vs. its payment | Strong-cash-flow rental |
| Home equity line | Standard income review | Smaller draws, flexible access |
| No cash-out | Nothing extra to qualify | You do not need the funds |
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. A retiree with a strong-cash-flow rental may prefer that route and keep the portfolio out of the file entirely. A retiree with a thin-cash-flow rental and a large portfolio may fit depletion better. The complete DSCR loans guide covers the investor side in full.
What Asset Depletion Doesn’t Fix, and Where Files Go Wrong
Asset depletion does not repair credit, clear title problems or make illiquid wealth usable. A retiree whose net worth sits in real estate and private holdings often has little that counts.
Common mistakes include:
- Counting the same assets for income and for reserves.
- Moving money between accounts right before applying, which creates deposits that need sourcing.
- Assuming one lender’s divisor applies everywhere.
- Assuming cash-out is allowed because purchase is.
- Ignoring occupancy, since a rental and a primary home follow different paths.
Key Terms Defined
Divisor: The number of months a lender spreads your usable assets over to produce monthly income.
Haircut: The discount a lender applies to an asset so it counts at less than face value.
Imputed income: Income the lender calculates from your assets rather than from a paycheck.
Reserves: Cash left in your accounts after closing, held to cover housing payments.
Seasoning: The time assets must sit in your accounts before a lender will count them.
Jumbo loan: A mortgage above the conforming limit for your county and property type.
Frequently Asked Questions
Do I have to sell my investments to use asset depletion?
No. The calculation is a qualifying method, so nothing is sold or pledged. Your portfolio stays invested. You do need separate liquid funds for closing costs and reserves.
Does home equity count as an asset?
Generally not. The property securing the loan is excluded, so only cash, brokerage and vested retirement assets feed the calculation. That is why a house-rich retiree can still fail the income test.
Is cash-out allowed on every asset-depletion program?
No. Some programs allow it at lower leverage, and others restrict it to purchase or rate-and-term refinances. On an owner-occupied primary residence, asset depletion runs to about 80% LTV. Always confirm the cash-out rules on the specific program, subject to lender guidelines.
Can I use asset depletion on a rental property?
Sometimes, but many paths target primary and second homes. Investment cash-out in our network tops out around 75% LTV. A DSCR loan, which looks at the rental’s income, is often the cleaner route.
What if I already take IRA or 401(k) distributions?
Some programs let you document ongoing distributions as income, often with a continuance requirement. That can replace depletion on the same file, and the better path depends on the program.
Next Step
If you are retired and want to see how the numbers work, Lendmire can help you compare asset-depletion options based on your assets, the property, credit profile, leverage and your goals. Lendmire is a broker that arranges financing through select lenders, and its consumer mortgage licensing covers 16 states, so confirm your state first. Reach the team at 828-256-2183. This is not a commitment to lend.
For a side-by-side look at the two qualification paths, see Lendmire’s piece DSCR vs Asset Depletion on a Super Jumbo Purchase or Cash-Out.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
As a non-QM mortgage broker, Lendmire (NMLS# 2371349) arranges financing through wholesale lending channels. Its consumer mortgage licensing covers 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
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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
1. NAHB, conforming loan limits
2. Orrick InfoBytes, conforming loan limit increases
3. CFPB Regulation Z, Ability-to-Repay rule
4. IRS, Exceptions to tax on early distributions
This article is part of Lendmire’s self-employed mortgage guides — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Super Jumbo Cash-Out Refinance Documentation Using Bank Statements · Super Jumbo Cash-Out Refinance Equity Requirements on Bank Statements · How to Qualify a Practice Owner for a Super Jumbo Cash-Out
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.