The Quick Read: A co-owner buyout is one new loan that pays off the old mortgage, pays the departing owner, and releases that owner from the debt, and the right asset-based program depends on whether your liquid assets cover the whole loan or are converted into qualifying income.
- The asset qualifier path counts eligible assets against the entire loan and documents no employment or income, with no traditional personal-income documentation, pay stubs or employment verification.
- The asset depletion path divides usable assets by 60 months to create a qualifying income, which then runs through the debt-to-income test.
- The buyout payout shares the same leverage ceiling as the old payoff and the closing costs, so leverage is usually the binding limit.
- A deed alone does not take the departing owner off the note. The refinance does.
- Every file is fully underwritten, and the assets are documented with statements. Terms are subject to underwriting and lender guidelines.
What “Asset-Based” Actually Means Here
“Asset-based” gets used for three different products, and only some of them fit a buyout. Sorting them out first saves a lot of wasted calls.
| Approach | What is underwritten | Fit for a buyout | Main limit |
|---|---|---|---|
| Asset qualifier | Eligible assets vs. the whole loan | Strong for cash-rich keepers | Assets must equal the loan |
| Asset depletion | Assets turned into monthly income | Strong, including investment property | Lower cash-out leverage |
| DSCR | Property rent vs. the payment | Strong for rentals | Rent must carry the payment |
| Hard money or bridge | The property and the exit plan | Short-term fix only | Short runway, higher cost |
The brokerage places them through select lenders in its wholesale network, and Lendmire’s asset-based mortgage programs page lays out the product family. DSCR qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. It is a separate lane for rentals, and it fits when the rent is strong and your personal assets are not the story.
The asset-based programs suit a particular reader. Think of a retiree, someone who sold a business, an heir, or a household living off a portfolio. Balances are large and documented income is small. If that is you, the question is which path turns your balances into a loan that buys out your co-owner.
Which Path Fits You: Assets Cover the Loan, or Assets Become Income
A borrower is qualified on one path at a time. The two never blend.
Asset qualifier path. Your eligible assets, after the credit percentages below, must equal or exceed the entire loan amount. No employment or income is documented. Loans run up to $4,000,000, with a 600 minimum credit score. On this path the credit percentages are:
- Brokerage accounts, certificates of deposit, money market and savings accounts count at 100%.
- 401(k) and IRA balances count at 90% under age 59½ and 100% at 59½ or older.
Seasoning is 60 days, with two months of statements for each qualifying account. Leverage runs up to 80% on a purchase and up to 75% on a refinance of a principal residence or second home. Reserves are not required at or below 75% loan-to-value, subject to underwriting.
Asset depletion path. Usable assets divided by 60 months become monthly qualifying income. That income must carry the housing payment and other debts through the debt-to-income test. Loans run from $125,000 to $3,500,000. The credit follows the lender’s matrix, and a first-time investor on this path needs a 700 score. On this path the haircuts are:
- cash accounts and certificates of deposit at 100%
- securities at 80%
- retirement accounts at 70% at any age
- real-estate equity at 60%
Statements must be at least 120 days old at application, plus a recent statement within 45 days. Minimum qualified assets are the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when asset depletion is your only income source.
If you can pick, the qualifier path is simpler when your balances are at least as large as the loan. The depletion path is the one that works when they are not, and it is the only path of the two that reaches an investment property. Cash-out proceeds never count as qualifying assets on either path.
How Does the Buyout Fit Under the Leverage Cap?
The payout, the old payoff and the closing costs all draw on the same leverage ceiling. On the depletion path, a cash-out refinance on a principal residence, second home or investment property is capped at 60% of value, subject to underwriting. A rate-and-term refinance reaches 80% on a principal residence or second home and 65% on an investment property.
Whether a lender treats a co-owner buyout as cash-out or as a standard refinance is the lender’s call. The safe planning move is to size the deal against the cash-out ceiling. On the qualifier path, the cash-out leverage is set by the lender and is not published, so ask before you commit to a number.
Run it in units instead of dollars. Say the home is worth 100 units, the existing mortgage is 40 units, and the departing partner owns half the equity. Equity is 60 units, so the partner’s share is 30 units. The new loan must cover 40 plus 30, which is 70 units, plus closing costs.
- On the depletion path with a 60% cash-out ceiling, the loan tops out at 60 units. You are at least 10 units short before costs.
- On the qualifier path, if the lender treats the buyout as a standard refinance at the 75% ceiling, the loan can reach 75 units. That clears the 70-unit need, with a thin cushion for costs.
- If the appraisal comes in at 90 units instead of 100, the 60% ceiling falls to 54 units. The amount owed does not shrink, so the gap widens. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
A low appraisal is the quiet killer here. It cuts the loan without cutting the debt you owe your partner. Build a fallback into the buyout agreement before the appraisal is ordered.
What Counts, and What Doesn’t
Some assets surprise people.
A founder’s or shareholder’s route is documented liquid assets: seasoned proceeds from a sale or conversion, cash, public securities and retirement accounts at their credit percentages. On the depletion path, sale-of-business, inheritance and legal-settlement funds are excused from the 120-day statement-age rule.
Cryptocurrency, precious metals, collectibles and pledged or borrowed funds are not published as eligible on either path. The documented route is to convert them to a seasoned cash balance in a regulated account, with the source reviewed by the lender. Several other items are also ineligible on the depletion path:
- custodial accounts
- deferred compensation
- escrow accounts
- foreign funds
- cash on hand
- stock options
- non-vested restricted stock units
- funds from non-regulated financial companies
Here is how the arithmetic looks in a buyout context. The figures are illustrative, and the lender’s own calculation governs.
Qualifier path. Say the keeper needs an $800,000 loan to retire the old note, pay the partner and cover costs. The keeper holds $330,000 in brokerage accounts (100% counts, so $330,000), $300,000 in a 401(k) under 59½ (90% counts, so $270,000), and $200,000 in savings (100% counts, so $200,000). That is $800,000 of usable assets, which meets the loan on assets alone.
Depletion path. Say the keeper holds $1,500,000 in securities (80% counts, so $1,200,000) and $300,000 in cash (100% counts). That is $1,500,000 usable. Divided by 60 months, it produces $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test.
How the Buyout Works, Step by Step
Follow this sequence, and keep the deed for last.
1. Fix the number in writing. Agree on a value, subtract the liens, and split the equity by ownership share. Adjust for uneven contributions if the agreement calls for it.
2. Decide how the price is set. Tying the price to the refinance appraisal is common. Decide in advance what happens if the appraisal lands light. An investor discussion on BiggerPockets shows how a partner who wants a future-value price can collide with what a sale would actually net.
3. Confirm how the property is held. If title is in individual names, the closing involves a deed. If the owners hold LLC membership interests, the buyout is an assignment of that interest plus an amended operating agreement.
4. Qualify the keeper alone. The departing owner’s credit and assets leave the file. Only the keeper’s balances, credit and housing history count.
5. Size the loan. It must cover the old payoff, the partner’s share and the costs, and still fit under the leverage ceiling on the appraised value.
6. Let the closing agent sequence everything. The old note is retired, the partner is paid from the closing statement, the new lien is recorded, and title moves to the keeper or the keeper’s entity.
Why does the deed come after the refinance? Moving title early can alert the old lender and can create a title-chain question for the new one. It also leaves a gap if the loan then fails to close. Brokers generally see cleaner closings when the closing agent sequences the deed and the loan together.
A Deed Does Not Release the Departing Owner
A quitclaim deed changes who owns the property. It does not change who owes the debt. Legal Aid of Arkansas states that a quitclaim does not remove a name from a mortgage, and that only the lender can do that, usually through a refinance. If your partner signed the note, the refinance is what frees them, so put that release in the buyout agreement.
The reverse also matters. A partner who signed or guaranteed the existing loan generally cannot leave without lender consent, and the lender may want a replacement. The same investor thread on partner exit strategies walks through that problem. A new loan in the keeper’s name removes the problem entirely.
Which Program Fits Which Situation
| Your situation | Likely lane | Why |
|---|---|---|
| Balances at least match the loan | Asset qualifier | Assets cover the whole loan |
| Balances large, loan larger | Asset depletion | Assets become income |
| Investment property, assets heavy | Asset depletion | Only path that reaches it |
| Rental with strong rent coverage | DSCR | Rent carries the payment |
| Income shown through deposits | Bank statement | Deposits document income |
| Not yet seasoned or in a rush | Bridge or outside capital | Short-term fix, then refinance |
A few notes on that table. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
The asset-based lane is for the reader whose wealth sits in accounts.
Where the General Rule Breaks
Owner-occupied versus investment. On the depletion path, an investment property is a business-purpose loan with its own leverage limits. A principal residence or second home is a consumer mortgage, and consumer disclosures apply. Tell the broker how each owner uses the property before anything else, because the occupancy changes the leverage table.
LLC-held property. If the property sits in an LLC and the lender will not lend into the entity, the keeper may need to take title personally. Entity eligibility is subject to lender program terms. When a two-member LLC taxed as a partnership drops to one owner, the IRS treats it as a disregarded entity, as described in IRS Publication 3402, and tax treatment varies, so consult a qualified professional.
Not enough assets. If balances fall short on both paths, the buyout may not fit as a single loan. Possible fixes include an installment payout to the partner, a smaller partner share paid now and the rest later, or a partner who takes another asset in place of cash. These change the amount of cash the loan must produce, and the new loan then sizes itself against a smaller payout.
Cash from a retirement account. On the qualifier path, a 401(k) or IRA under age 59½ counts at 90%. On the depletion path, retirement accounts count at 70% at any age. Counting a balance as an asset is different from withdrawing it, and a withdrawal has its own consequences, which belong with a qualified professional.
Credit history. The depletion path wants a 0x30x12 housing history, and one late payment in the last twelve months is reviewed case by case. Multiple bankruptcies are not eligible. A housing event needs 4 years of seasoning on that path.
What If the Co-Owner Won’t Sign?
Every owner on title generally has to sign the closing documents. A holdout stalls the financing, so settle the price first.
The practical route is to negotiate a number, use a buy-sell clause if the operating agreement has one, and only then order the appraisal. If talks fail, the legal remedy is partition, which is a court matter and belongs with an attorney. Financing cannot start until ownership is resolved, so treat the agreement as step one rather than a formality.
Documents and Costs Checklist
Gather these before the file goes to a lender.
- A signed buyout or settlement agreement
- Proof of how long title has been held jointly
- The operating agreement, if an LLC is involved
- The existing mortgage payoff statement
- Statements for every qualifying account: two months on the qualifier path, plus statements at least 120 days old and one within 45 days on the depletion path
- Appraisal, title and entity documents
Closing costs and any prepayment charge on the old loan come out before the partner is paid. Leave room for them under the leverage ceiling, because they eat into the same limit as the payout.
Alternatives Worth Comparing
| Option | What it does | Main tradeoff |
|---|---|---|
| Cash-out refinance | One loan pays everything | Leverage ceiling limits it |
| HELOC or home equity loan | Draws on existing equity | Keeps the old note in place |
| Outside capital partner | New owner funds the payout | Gives up some ownership |
| Bridge loan | Short-term funding | Needs a refinance exit |
| Installment payout | Spreads the partner’s payment | Partner stays exposed |
| Selling the property | Splits proceeds | Ends your ownership |
The asset-based cash-out wins when you want to keep the property, stay on one note, and document your balances rather than income. It loses when the ceiling leaves the loan short, or when a partner will not leave without a release you cannot give.
Common Mistakes
- Quitclaiming the partner off title before the refinance closes.
- Planning the payout against the purchase leverage tier when the lender treats the deal as a cash-out.
- Counting privately held stock or crypto as qualifying assets.
- Letting statements age past the window on the depletion path.
- Agreeing to a buyout price before knowing what the appraisal will support.
- Assuming the departing owner is released without a refinance or lender release.
Key Terms Defined
Asset qualifier path: the program route in which eligible assets, after credit percentages, must equal or exceed the whole loan, with no income documented.
Asset depletion path: the program route in which usable assets divided by 60 months become monthly qualifying income.
Seasoning: how long funds have sat in your account, or how long title has been held, before a lender counts them.
Cash-out refinance: a new loan larger than the old payoff, where the extra pays the partner or goes to the borrower.
Haircut: the share of an asset’s balance a lender will not count, such as 20% off securities on the depletion path.
Frequently Asked Questions
Can an asset-based loan fund a co-owner buyout on an investment property?
Yes, through the asset depletion path, where the loan is business-purpose. It allows up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out refinance of an investment property, subject to underwriting. The qualifier path covers principal residences and second homes.
Does the departing owner need to be on the new loan?
No. The keeper qualifies alone, and the departing owner’s credit and assets leave the file. The refinance retires the old note, which is what releases the departing owner from the debt.
Do my assets count if they are in a retirement account?
Yes, at a reduced share. On the qualifier path, 401(k) and IRA balances count at 90% under age 59½ and 100% at 59½ or older. On the depletion path they count at 70% at any age.
What if my stock is in a company I own privately?
Privately held company stock is not an eligible asset on either path. The documented route is a sale or buyout converted to a seasoned cash balance, and sale-of-business funds are excused from the 120-day statement-age rule on the depletion path.
Is this a no-documentation loan?
No. Every file is fully underwritten. The qualifier path documents no employment or income and needs no traditional personal-income documentation, pay stubs or employment verification, but your assets are documented with statements.
If You Are Qualifying on Assets Rather Than Income
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. Lendmire is a mortgage broker, not a lender, and the program is placed through select lenders in its network in 16 consumer-lending states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Programs change. This is not a commitment to lend.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps self-employed and high-net-worth borrowers in 16 states qualify on bank statements, a profit-and-loss statement, 1099s or liquid assets instead of tax returns, through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and its 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
1. BiggerPockets, Buying Out a Partner
2. Legal Aid of Arkansas, Quitclaim Deed
3. BiggerPockets, Exit Strategies for Rental Property with Equity Partners
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 to Fund Large Philanthropic Gifts · 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
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.