The Quick Read: Asset-based refinancing that retires a second mortgage is arranged through select lenders, where your statements and balances carry the loan in place of tax returns, pay stubs or employment verification.
- A refinance that pays off a second mortgage is a new first-lien loan. It must close in first position.
- On the asset qualifier path, eligible assets must equal or exceed the entire loan amount.
- On the asset depletion path, usable assets are divided by 60 months to create qualifying income.
- Whether a second-lien payoff counts as cash-out depends on the program, and cash-out leverage is lower on the depletion path.
- Privately held company stock is not an eligible asset on either path.
Do Banks Actually Offer This?
Some banks may, but you should not count on the branch. Income-based underwriting is the standard approach for conventional loans, and asset-based programs work differently. They are offered through select lenders rather than every bank.
That is why a list of banks is the wrong tool here. The right lender depends on your property type, credit profile, leverage need and the assets you hold. Lendmire is a mortgage broker, not a lender. It places files with select lenders in its network and matches your scenario to the program that fits.
The programs below are available only through select lenders, and every file is fully underwritten. Lendmire’s consumer mortgage lending is licensed in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Everything here is subject to underwriting and lender guidelines, and none of it is a commitment to lend.
What “Asset-Based” Means (and What It Doesn’t)
Asset-based means the lender looks at what you own instead of what you earn. You provide no traditional personal-income documentation, pay stubs or employment verification. You do provide statements for every account that counts, and the lender reviews your credit, the property and the title.
This is not a no-documentation loan. It is a different set of documents. The reader it fits best has large balances and light paper income: a retiree, someone who sold a business, an heir, a settlement recipient, or a household living off a portfolio.
Lendmire’s asset-based mortgage programs come in two forms. In one, the assets cover the whole loan. In the other, the assets are converted into monthly income. You qualify on one path at a time, never a blend of both.
If you do document income through bank deposits, that is a separate program, the bank statement loan. Asset-based lending is for borrowers whose strength is the balance, not the deposits.
Key Terms Defined
Second mortgage: a loan secured by the same property that sits behind the first mortgage. HELOCs and home equity loans are the common kinds.
Lien priority: the order in which lenders get paid from the property if it is sold or foreclosed. The first lien is paid first.
Subordination agreement: a signed agreement in which the second lender agrees to stay behind a new first mortgage.
Cash-out refinance: a new loan that pays off the old one and may return cash to you. Some lenders also treat a second-lien payoff as cash-out even when no cash comes back.
Asset qualifier path: the route where eligible assets, after the credit percentages, must equal or exceed the whole loan.
Asset depletion path: the route where usable assets divided by 60 months become qualifying income.
Seasoning: how long funds must sit in your accounts before they count.
Why a Second Mortgage Changes the Math
A second mortgage forces a choice about lien order, and that choice shapes the whole file. Here is the problem in plain terms. When a new lender pays off your old first mortgage, any HELOC behind it would normally move up into first position. Nolo explains that the refinancing lender will probably require the HELOC lender to sign a subordination agreement to stay behind the new loan.
Paying the second off at closing removes the need for that agreement. Yahoo Finance notes that when a home equity lender refuses to subordinate, one fix is to pay the second loan off, either with your own funds or through a cash-out refinance.
Experian describes a cash-out refinance as replacing your existing mortgage. A home equity loan is a second mortgage with its own monthly payment. Combining the two liens leaves one loan, one lien and one payment.
There is a trade-off. Bankrate points out that a cash-out refinance resets the entire balance, while HELOCs and home equity loans leave the first mortgage untouched. If your first mortgage has favorable terms, replacing it just to remove a second may cost you more than it saves. Weigh that before you apply.
How Underwriting Treats the Payoff, Step by Step
The lender builds the loan around one number: everything that must be paid off. These are the steps in order.
1. Total the payoff stack. Add the first mortgage payoff, the second mortgage or HELOC payoff, and closing costs. Title orders a payoff statement for each lien.
2. Classify the loan. Some programs treat a payoff of a second that was not used to buy the property as cash-out, even when no cash comes back. Others call it a rate-and-term refinance. Which rule applies depends on the program, so ask before you pick a lender.
3. Order the appraisal. Value sets the ceiling. The loan, including both payoffs, has to fit inside the leverage cap for the path and occupancy.
4. Choose the path. The asset qualifier path asks whether your eligible assets cover the whole loan. The asset depletion path asks whether the income created from your assets carries the housing payment and other debts.
5. Document the assets. Statements prove the balances and their age. The lender reviews the source of any large deposit.
6. Review credit and housing history. A prior mortgage history and credit score both matter. Details are in the table below.
7. Close through title. Title pays each lien and collects a release from each lienholder. The new loan is recorded in first position.
Underwriting is not skipped on any of these steps. The lender’s own calculation governs, and the examples here are illustrative.
Two Paths, Side by Side
The two paths set different leverage, loan sizes and documents. This table shows ceilings and floors through select programs, subject to underwriting. They are not offers.
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| How assets are used | Cover the whole loan | Become monthly income |
| Purchase leverage | Up to 80% (principal residence or second home) | Up to 80% (principal residence or second home); 65% on investment property |
| Refinance leverage | Up to 75% | 80% rate-and-term, 60% cash-out (principal residence or second home); 65% and 60% on investment property |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
| Credit | 600 minimum | The lender’s matrix |
| Seasoning | 60 days, two months of statements per account | Statements 120 days old plus one within 45 days |
On the qualifier path, whether cash-out proceeds are allowed, and at what leverage, is set by the lender and is not published. Do not plan around a cash-out figure on that path. On the depletion path, cash-out proceeds never count as qualifying assets.
The depletion path has extra requirements. You need qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance. If assets are your only income source, you also need at least $250,000 liquid. A first-time investor on this path needs a 700 score. Housing history is typically 0x30x12, and one 30-day late in the last twelve months is considered case by case. Multiple bankruptcies are not eligible, and a housing event needs four years of seasoning.
Asset-derived income may also supplement documented income, up to a 45% debt-to-income ratio. When it does, the minimum-assets rule is waived.
Which Assets Count
Each path counts accounts differently. Percentages below are the share of the balance that counts.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Brokerage accounts | 100% | Securities at 80% |
| Cash, savings, money market | 100% | Cash at 100% |
| Certificates of deposit | 100% | 100% |
| Retirement accounts | 90% under 59½; 100% at 59½ or older | 70% at any age |
| Real-estate equity | Not listed | 60% |
Accounts combine, so a mix of brokerage, savings and retirement balances can add up to the loan amount.
Some assets do not count at all. Cryptocurrency, precious metals, collectibles, pledged or borrowed funds, and business accounts beyond your ownership share are not published as eligible on either path. On the depletion path, 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 are also excluded.
If most of your wealth sits in one of those categories, the route is conversion. A sale or buyout turns the asset into cash. That cash needs to land in a regulated account, and the lender reviews the source. On the depletion path, sale-of-business, inheritance and legal-settlement funds are excused from the statement-age rule.
Run the Numbers
Say you are refinancing a first and a second mortgage into one $800,000 loan on the asset qualifier path. Your accounts look like this:
- Brokerage accounts: $330,000, counted at 100%, which is $330,000.
- A 401(k) under age 59½: $300,000, counted at 90%, which is $270,000.
- Savings: $200,000, counted at 100%, which is $200,000.
Usable assets total $800,000. That equals the loan, so you qualify on assets alone, subject to underwriting, credit and the appraisal. No reserves are required at or below 75% loan-to-value on this path. Above that, the lender sets them.
Now the depletion path, which works differently. Say you hold $1,500,000 in securities and $300,000 in cash. The securities count at 80%, giving $1,200,000, and the cash counts at 100%, giving $300,000. Together that is $1,500,000 of usable assets, and dividing by 60 months gives $25,000 of monthly qualifying income.
That income then has to carry the housing payment and your other debts through the debt-to-income test. The payoff of your second mortgage raises the new housing payment, so a larger payoff leaves less room under that test.
Where the Rule Breaks
- The second lender won’t subordinate. It has no obligation to. If you want to keep the HELOC, you need its cooperation. If you don’t, a payoff inside the new loan makes the question go away.
- The HELOC is open or drawn. Pay the drawn balance, and expect a request to close the line. Left open, it could become a lien problem, as Nolo’s explanation of lien priority makes clear.
- The second was taken at purchase. A purchase-money second, seller note or short-term loan used to buy the property can change how a lender treats the payoff. Programs differ, so ask.
- A mixed payoff. If the second is paid off and no cash comes back, some programs treat the file differently from a true cash-out. Lender programs differ here, so the answer depends on the program.
- Founder or shareholder wealth. Privately held company stock is not an eligible asset on either path. The documented route is liquid assets: seasoned proceeds from a sale or conversion, cash, public securities and retirement accounts at the percentages above.
- Retirement money under 59½. On the qualifier path, those balances count at 90%. On the depletion path, they count at 70% at any age.
- A recent housing event. On the depletion path, a housing event needs four years of seasoning.
- Veterans. If you are also weighing a VA route, Lendmire’s piece Can a VA Cash-Out Refinance Pay Off a Private Second Mortgage? covers that program separately.
Investment property adds one more wrinkle. It is eligible only on the asset depletion path, at up to 65% on a purchase or rate-and-term refinance and up to 60% on a cash-out refinance. Business-purpose loans on investment property are reviewed differently from a standard owner-occupied mortgage.
Pay It Off, Subordinate, or Use Cash?
Which option wins depends on your first mortgage, your assets and what the second lender will do. This table lays out the three.
| Option | What happens | Best when |
|---|---|---|
| Pay off inside the new loan | One loan, one lien, one payment | Your first mortgage isn’t a bargain worth keeping |
| Subordinate the second | Existing first and HELOC both stay | The second lender agrees and the first is worth keeping |
| Pay the second with your own cash | Second is retired, first stays | You have idle cash and a first you want to keep |
Subordination is the option people expect to be simple. It usually isn’t. The new lender sends a package to the second lender, which may charge a review fee and is free to say no. If it declines, paying the second off is the fallback.
The “keep the first” options also leave your asset position different. Using idle cash to retire a second removes that cash from the balances a lender could count. Plan that before you commit.
Get Your Documents Ready
Statements drive this file, so the checklist is mostly about them.
- Statements for every account that counts, with two months per account on the qualifier path.
- On the depletion path, statements at least 120 days old, plus the most recent statement within 45 days.
- Evidence of the source for any large recent deposit, such as a sale, inheritance or settlement.
- Recent payoff information for the first mortgage and the second or HELOC.
- Your ID, your housing history and the property details.
- For the depletion path, an estimate of the housing payment and your other monthly debts so the debt-to-income test can be run.
Two months of clean statements and a sourced deposit trail make the file easier to review. They don’t guarantee approval.
Frequently Asked Questions
Can one asset-based loan pay off both my first and second mortgage?
Yes, when the new loan covers the full payoff and fits inside the leverage cap. On the qualifier path, refinance leverage goes up to 75% on a principal residence or second home. On the depletion path, a cash-out refinance is limited to 60%, and a rate-and-term refinance can reach 80% on a principal residence or second home. Whether your payoff counts as cash-out depends on the program.
Does paying off a second count as cash-out?
It depends on the program. Some lenders treat a payoff of a second that did not fund the purchase as cash-out even when no cash comes back. That matters because the depletion path lowers leverage to 60% on cash-out. Ask which classification applies before you order an appraisal.
Do I need the second lender’s consent?
Only if you want to keep the second. A subordination agreement needs its consent, and it can refuse. Paying the second off inside the new loan removes the need for any agreement.
Which assets count if I own part of a private company?
Privately held company stock is not an eligible asset on either path. A sale or buyout can turn it into seasoned cash, and the program reviews the source. Public securities, cash and retirement accounts count at the percentages for the path you use.
Is an asset-based loan a no-documentation loan?
No. You provide no traditional personal-income documentation, pay stubs or employment verification, but your assets are documented with statements, and your credit, the property and the title are all reviewed. Every file is fully underwritten.
What to Do Next
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.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending partners for borrowers whose tax returns understate their income, and each application is reviewed individually by the lender. 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
1. Nolo
2. Yahoo Finance — Refinancing a Second Mortgage
3. Experian — Cash-Out Refinance vs. Home Equity Loan
4. Bankrate — Home Equity Loan, HELOC or Cash-Out Refi
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Asset-Based Cash-Out Refinance Lenders on a Condo · Can You Get Approved for an Asset-Based Cash-Out Refinance With No Income Verification? · Best Asset-Based Cash-Out Refinance Program When Your Mortgage Is Almost Paid Off
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.