How an Asset Depletion Mortgage Works

The Quick Read: An asset depletion mortgage is reviewed against liquid savings and investments instead of paycheck or tax-return income. The lender takes the eligible balance, discounts the volatile parts, subtracts what the purchase itself will consume, spreads the remainder over a set number of months, and treats the result as monthly income. Nothing is sold or pledged. The loan is reviewed on documented income under the applicable program, subject to lender guidelines.

• It is a way of calculating income, not a separate kind of property. The same method can sit on top of a purchase or a refinance.
• The divisor (the number of months the pool is spread across) is the biggest lever. Programs differ on it, so always ask for it.
• Down payment, closing costs and reserves come out of the pool before any income is calculated.
• On a primary residence, the asset-depletion route typically reaches up to 80% LTV through select lenders in Lendmire’s wholesale network.
• Occupancy decides which paperwork regime applies, so the property type matters as much as the assets.

What Is Being Tested?

Asset depletion tests whether your balance sheet can carry the payment. It ignores whether your tax return shows enough income.

Picture a retired couple with a large brokerage account and a modest pension. Or a rental investor whose depreciation and expenses leave taxable income near zero. Both look weak on paper and strong in the bank. A conventional file reads the paper. Asset depletion reads the bank.

The word depletion is misleading. Lenders call the process notional depletion, meaning the lender runs the math as if the pool were spent down over time. In practice you keep the assets and keep investing them. Lendmire’s what is an asset depletion mortgage covers the basics. This article walks through the mechanics.

How Underwriting Treats It, Step by Step

Underwriting runs seven moves in a consistent order. Programs differ on the numbers, but the sequence barely changes across the lenders in Lendmire’s network.

1. Inventory the assets. The lender looks at bank, brokerage and retirement accounts. Business accounts, borrowed funds and illiquid holdings generally do not count.

2. Apply a haircut by asset type. Cash counts at full value. Securities and retirement accounts are discounted, because their value can fall or carry withdrawal costs.

3. Subtract transaction needs. The down payment, closing costs and required reserves come out of the pool first. Reserves commonly run around six months of the housing payment.

4. Divide by the program’s period. The remainder, spread across a set number of months, produces imputed monthly income. Imputed just means calculated rather than received.

5. Add other documented income. A pension, Social Security or other income can be stacked on top, if the specific program allows it.

6. Run debt-to-income. The combined income is tested against the new payment and your existing debts. The ceiling is the program’s own choice.

7. Verify and document. Account statements are the record. Large recent deposits typically need a paper trail showing where the money came from.

Say the pool shrinks by 20% because you raised the down payment. Monthly income shrinks by the same 20%, since the divisor stays put. The relationship is linear, which makes the calculation easy to test before you apply.

Why the Divisor Changes Everything

The divisor is the single biggest lever in the whole calculation. Cut the period in half and the same assets produce double the monthly income.

Lenders do not agree on one number. Some programs use a long runway that treats your assets as lasting decades. Others use a short one that treats them as a pool you could spend through in several years. Both are legitimate underwriting choices. A shorter period is more generous, and a lender may pair it with heavier haircuts or tighter leverage to compensate.

That variation is why a broker earns a fee here. A few lenders in the network lean on short divisors with steep haircuts. Others use gentler haircuts with longer periods. The right match depends on whether your pool is mostly cash, mostly securities, or mostly retirement money.

Asset depletion is one of three common documentation paths. The table shows where it fits.

Which Assets Count

Cash counts best, followed by brokerage holdings, then retirement accounts. Funds you cannot access or did not source do not count.

Cash and cash equivalents sit at or near full value. Stocks and bonds are discounted for market risk. Vested retirement accounts are discounted further, and some programs apply age-related access rules. Whether a given account is eligible depends on the program sheet, so confirm before you build a plan around it.

Several holdings usually fall out of the pool entirely:

• Business accounts and business ownership.
• Borrowed funds, including a margin balance.
• Illiquid holdings such as private stakes.
• Equity in the home that secures the loan. Federal ability-to-repay rules exclude the dwelling securing the loan from the assets a lender considers, as CFPB’s Regulation Z text confirms.

Ownership matters too. Joint accounts generally work when the account holder is also a borrower.

Structures and Variations

Asset depletion is a qualification method, so it attaches to several loan structures. The leverage ceilings change with the transaction and the occupancy.

• Primary residence, asset-depletion route: up to about 80% LTV on a primary residence. LTV is the loan amount as a share of the property value.
• Primary residence, bank statement route: up to 90% LTV on a purchase or rate-term refinance, through select lenders. Stronger files earn the top of that range.
• Owner-occupied cash-out (primary or second home): up to 80% LTV on bank statement files using a fixed expense ratio, or 75% with an accountant-prepared ratio. That is a different ceiling from the purchase figure, and loan size and credit adjust it.
• Investment property cash-out: tops out around 75% LTV.
• Investment property purchase: leverage on alternative documentation varies by lender. For investment purchases, investor-focused leverage guidance belongs to the DSCR side.

Loan sizes generally run from $125,000 to $3,500,000, subject to lender guidelines. Term length follows each lender’s program sheet, so expect a standard structure. Do not assume a 40-year or interest-only option exists on this type of file, because those are DSCR-side offerings.

Two structures deserve a separate mention. A hybrid file adds imputed asset income to income you can already document. A refinance file uses the same pool test, but cash-out proceeds do not count toward your reserves.

Where the General Rule Breaks

Five edge cases account for most of the surprises on these files.

The same dollars cannot count three times. A dollar used as a down payment is not also a reserve, and neither is also income. Borrowers who read their current statement balance as their qualifying pool are often surprised. Plan on the balance left after closing, not the balance today.

Heavy reserves tie up your cash. Because the pool is consumed by the transaction, these loans demand real liquidity. If you need that money for a renovation or a second purchase, count it out of the plan first.

Large deposits trigger questions. A recent transfer between your own accounts or a gift needs a paper trail. Money that appears from nowhere right before application invites a closer look.

Market swings change the pool. If your securities drop between application and closing, the haircut balance drops with them. A thin cushion can disappear. Borrowers with portfolios weighted toward stocks should build in a margin.

Retirement access rules vary. Some programs count retirement accounts only at full vesting or at a certain age. Others apply a steeper discount instead. Ask before you assume.

One more point: asset depletion is not the same as qualifying on the interest or dividends your assets produce. The lender is not counting what the portfolio pays out. It is counting the portfolio itself, spread over time.

Occupancy Decides the Paperwork

The property’s use determines which disclosure regime applies. This is where many investors mix things up.

An owner-occupied file, meaning a primary residence or second home, is a consumer mortgage. TRID, the federal rule behind the Loan Estimate and Closing Disclosure, applies to it. A bank-statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from TRID. Short-term rental rules vary by city, county, HOA and property type, so investors should confirm local rules before relying on projected rental income.

Underneath all of it, the federal ability-to-repay rule lets a lender base its decision on income, on assets other than the dwelling, or on both, so asset-based qualification has a regulatory footing. Cornell Law School’s text of 12 CFR 1026.43 adds that the lender must verify whatever income or assets it relies on using reliable third-party records. That is why account statements are not optional. Nolo’s plain-language summary describes the same duty as a reasonable, good-faith determination that you can repay.

The rule requires lenders to consider debt-to-income but sets no number, so any ceiling is the program’s own. The old 43% figure is not a federal limit today.

Lendmire’s consumer mortgage licensing covers 16 states, so confirm availability for your property’s location before you plan around this path.

The Investor Decision in Practice

Asset depletion fits when you are asset-rich, income-light, and do not want the property’s rent to be the qualifier.

A rental investor with large depreciation write-offs is the classic case. The tax return shows little income, but the brokerage account shows plenty of wealth. Tax treatment can depend on how the funds are used and how the property is held. Investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

DSCR is often the cleaner fit when the property’s rent covers its own payment. DSCR is business-purpose by design, so it cannot finance your primary home. If you are buying your own residence and the balance sheet is your strength, asset depletion is the more natural path. For a pure rental purchase, Lendmire’s complete DSCR loans guide explains the alternative.

A quick decision test:

• Is the property your home or a second home? Asset depletion or bank statement documentation may apply.
• Is the property a rental that covers its payment? Look at DSCR first.
• Is most of your wealth liquid and documentable? Asset depletion is worth running.
• Will closing drain your liquid pool? Run the math on the post-closing balance.

Pricing on asset-based files typically carries a premium over a conventional loan. The calculator on the site is an editable, illustrative estimate for testing structures. It is not a quote.

Common Misconceptions

• The lender takes or freezes my assets. Nothing is liquidated or pledged. The calculation is a qualifying test only.
• Documentation is not a factor. The lender still verifies the asset statements and other documents it requires, subject to its guidelines.
• There is a federal DTI limit. There is not. The program sets its own ceiling.
• Every lender uses the same divisor. They do not. Ask for it.
• Home equity counts. The dwelling securing the loan is excluded.
• The result is my payment cap. The result is your total monthly income, and DTI sets the cap.

Key Terms Defined

Asset depletion: A way of qualifying where the lender converts liquid assets into imputed monthly income.

Haircut: A discount applied to an asset’s value to reflect risk, such as a market drop or withdrawal costs.

Divisor: The number of months the usable pool is divided across to produce monthly income.

Imputed income: Income the lender calculates from your assets rather than income you actually receive.

DTI (debt-to-income): Your monthly debts, including the new payment, compared with your monthly income.

LTV (loan-to-value): The loan amount as a percentage of the property’s value.

Reserves: Liquid funds you must hold after closing, commonly around six months of the housing payment.

Non-QM: A mortgage outside the standard qualified-mortgage box, underwritten on its own program terms.

Next Step

If you are asset-rich and want to see how the numbers work, Lendmire can help you compare alternative-documentation options based on your assets, the property, credit profile, leverage, and your goals. Program terms vary by lender and are not a commitment to lend.

For current guidelines and terms, see Lendmire’s self-employed mortgage programs page.

About Lendmire

Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.

References

1. CFPB Regulation Z § 1026.43

2. Cornell Law School, 12 CFR 1026.43

3. Nolo, new mortgage rules and ability to repay