The Quick Read: The best program for your situation is the one that fits how your balances are held, because an asset-based refinance is reviewed around documented assets, with no traditional personal-income documentation, pay stubs or employment verification, and whether it can retire a second lien depends on the path, the leverage cap and how the lender classifies the payoff.
- On the asset qualifier path, eligible assets must equal or exceed the entire loan, and refinances go up to 75% loan-to-value on a principal residence or second home, subject to underwriting.
- On the asset depletion path, usable assets divided by 60 months become qualifying income, and cash-out is capped at 60% on every occupancy type.
- A borrower is reviewed on one path at a time, and cash-out proceeds never count as qualifying assets.
- Every file is fully underwritten, and the assets are documented with statements.
This article is written for cash-heavy, income-light borrowers. Retirees, business sellers, inheritance or settlement recipients and portfolio-funded households fit this profile. Their balances are large, and their documented income is not.
Can an Asset-Based Refinance Pay Off a Second Mortgage?
Yes, in the sense that a new first lien can retire an existing first and a second together, with the title company paying both off at closing. The harder question is classification. Lenders differ on whether clearing a second counts as cash-out or as a rate-and-term refinance, and that choice sets the leverage cap.
Lenders usually look at how the second was used and how recently it was drawn. A second that funded the original purchase is often treated differently from one drawn later to pull equity. A second with fresh draws is the most likely to be treated as cash-out.
Lendmire is a mortgage broker, not a lender. It places asset-based files through select lenders in its wholesale network. Because those lenders draw the cash-out line differently, the sensible first step is asking how your particular payoff would be classified before you pick a program.
Conventional rules show how much this varies. Fannie Mae’s conventional cash-out loans require 12 months of ownership, and a summary of that rule notes it does not apply to existing subordinate liens being paid off. That is an agency rule, not a rule of the asset-based programs described here.
Two Paths: Assets Cover the Loan, or Assets Become Income
Lendmire’s asset-based mortgage programs run on two paths, and the paths do not blend. The first question is which one fits your balance sheet.
| Factor | Asset qualifier path | Asset depletion path |
|---|---|---|
| How assets are used | Must cover the entire loan | Divided by 60 months into income |
| Income documented | None | Derived income runs through debt-to-income |
| Refinance leverage (primary or second home) | Up to 75% | Up to 80% rate-and-term |
| Cash-out leverage | Set by lender, not published | 60% |
| Investment property | Not offered | 65% rate-and-term, 60% cash-out |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
| Credit | 600 minimum score | Lender’s matrix |
All figures are ceilings and floors, subject to underwriting and through select programs. They are not offers.
The qualifier path suits a borrower whose liquid balances are at least the size of the loan. Nothing about employment or income is documented, and the lender’s ability-to-repay review rests on the assets. The depletion path suits a borrower whose assets are large but would not cover the whole loan. It turns the balances into income, which then carries the housing payment and other debts.
If your main goal is to retire a second lien and take out little or no cash, the qualifier path is often the cleaner fit. The reason is that its refinance cap is higher than the depletion path’s cash-out cap. Still, the qualifier path’s cash-out treatment is up to the lender, so confirm how a payoff is classified before relying on it.
What Counts as an Asset on Each Path
The two paths credit your balances differently. A balance that counts in full on one path can count for less on the other.
Qualifier path credit:
- Brokerage accounts, certificates of deposit, money market and savings count at 100%.
- Retirement accounts count at 90% if you are under 59½ and 100% at 59½ or older.
- Accounts combine toward the loan amount.
Depletion path credit:
- Cash accounts and certificates of deposit count at 100%.
- Securities count at 80%.
- Retirement accounts count at 70% at any age.
- Real-estate equity counts at 60%.
Several holdings are not eligible on the depletion path. These include custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units. Privately held company stock is not an eligible asset on either path.
Cryptocurrency, precious metals, collectibles and pledged or borrowed funds are not published as eligible on either path. The documented route is converting them to a seasoned cash balance in a regulated account. The lender then reviews the source of that cash.
A founder or shareholder follows the same route. Seasoned proceeds from a sale or buyout, cash, public securities and retirement accounts count at their haircuts.
How Underwriting Treats the Payoff, Step by Step
1. Pick the path. Compare your total eligible assets against the full loan amount. If they cover it, the qualifier path applies. If not, the depletion path applies.
2. Add up the payoffs. The first mortgage, the second lien, any financed costs and any cash you take out must all fit under the leverage cap for your path and occupancy.
3. Document the assets. The qualifier path needs 60 days of seasoning and two months of statements per qualifying account. The depletion path needs statements at least 120 days old plus the most recent one within 45 days. Sale-of-business, inheritance and legal-settlement funds are excused from that seasoning.
4. Check credit. The qualifier path sets a 600 minimum score. The depletion path follows the lender’s score and loan-amount matrix. Housing history is reviewed at 0x30x12, and one late in the last twelve months is considered case by case.
5. Order the appraisal and the payoff letters. The appraisal sets value. The payoff letters tell the title company what each lien needs.
6. Release the second. The second lien must be paid and released, and a HELOC should be closed rather than left open.
7. Review the file. Underwriting applies the program’s own tests, and the lender’s calculation governs.
The depletion path adds minimums. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. Asset depletion as the only income source requires at least $250,000 liquid. A first-time investor on this path needs a 700 score.
Where the General Rule Breaks
Proceeds cannot be reused. Cash-out proceeds never count as qualifying assets. If you plan to pull cash and then present it as reserves, the file will not work that way.
The second was a purchase-money loan. Some programs treat the payoff as rate-and-term when the second financed the original purchase. Others look at how much cash you take home. The classification changes the cap, and on the depletion path that gap is 20 points on a primary residence.
Investment property. Investment property is available only on the depletion path, and the loan is business-purpose. Under Regulation Z, credit extended primarily for a business purpose is exempt from the consumer-credit rules. The CFPB’s commentary treats credit to acquire, improve or maintain a non-owner-occupied rental as business-purpose. Leverage is lower here. It runs 65% on a purchase or rate-and-term refinance and 60% on a cash-out.
A seasoned housing event. A bankruptcy or foreclosure needs 4 years of seasoning on the depletion path, and multiple bankruptcies are not eligible.
A hard-money or bridge second. If the second is short-term private debt, the better lane may be a rental-income review framework rather than assets.
Assets that mostly do not count. If most of your wealth sits in private company stock or crypto, neither path will credit it as is. Convert first, season the cash, then apply.
Choosing the Best Program for Your Situation
The best program is the one whose rules match your balance sheet, not the one with the highest leverage on paper. The lenders that write these loans differ on cash-out treatment, so a broker that shops several can match the scenario to the right program.
| Your situation | Likely fit |
|---|---|
| Liquid assets cover the whole loan | Qualifier path |
| Large portfolio, but less than the loan amount | Depletion path |
| Retirement accounts are the bulk of assets | Depends on age, since the qualifier path credits 100% only at 59½ or older |
| Payoff only, little cash out | Qualifier path, subject to how the lender classifies it |
| Investment property | Depletion path only |
| Assets are private stock or crypto | Convert to cash first |
Retirement balances are a good example of how the path matters. A 59½-or-older borrower holding mostly a retirement account gets full credit on the qualifier path. The same account counts at 70% on the depletion path.
A Worked Example
These figures are illustrative, and the lender’s own calculation governs.
On the qualifier path, consider an $800,000 loan with $330,000 in brokerage accounts (100% = $330,000), $300,000 in a 401(k) under 59½ (90% = $270,000) and $200,000 in savings (100% = $200,000). That counts $800,000 of usable assets, so the file is reviewed on assets alone, subject to underwriting.
On the depletion path, take $1,500,000 in securities (80% = $1,200,000) plus $300,000 in cash (100% = $300,000). That is $1,500,000 usable. Divided by 60 months, it produces $25,000 of monthly qualifying income. That income must then carry the housing payment and other debts through the debt-to-income test.
The takeaway is that the same wealth reads differently on each path. The qualifier path asks whether the assets cover the loan. The depletion path asks whether the income they produce carries the payment.
Key Terms Defined
Asset qualifier path: The path where eligible assets, after credit percentages, must equal or exceed the entire loan amount.
Asset depletion path: The path where usable assets divided by 60 months become qualifying monthly income.
Haircut: The share of an account’s balance that a program refuses to count, such as 20% off securities.
Seasoning: The time funds must sit in an account, shown by statements, before they count.
Rate-and-term refinance: A refinance that replaces existing debt without giving the borrower meaningful cash back.
Cash-out refinance: A refinance that replaces existing debt with a larger loan and pays the borrower the difference.
Frequently Asked Questions
Does paying off my second mortgage count as cash-out or rate-and-term?
It depends on the lender and the history of the loan. A second used to buy the home is often treated more gently than one drawn later for cash. On the depletion path the difference matters, because cash-out is capped at 60% while rate-and-term on a primary residence runs up to 80%. Ask how the payoff will be classified before you commit.
Can proceeds from my refinance count as qualifying assets?
No. Cash-out proceeds never count as qualifying assets on the depletion path, and Lendmire’s programs do not credit them as reserves. Plan the file so your documented assets stand on their own.
Is an asset-based mortgage the same as a no-documentation loan?
No. Every file is fully underwritten, and the assets are documented with statements. What is absent is employment verification, tax returns and pay stubs on the qualifier path. The depletion path converts assets into income instead.
Do I have to close my HELOC when I refinance?
A HELOC being paid off should generally be closed and its lien released, so the new loan holds first position. Confirm this with the title company and the lender, because the specifics depend on the second lien’s terms. Also check the old note for any prepayment penalty.
Where is this program available?
Lendmire’s consumer mortgage lending covers 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Availability within those states depends on the property and the borrower.
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. Reach the team at 828-256-2183. Program terms are subject to underwriting and are 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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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. Cornell Law School Legal Information Institute, 12 CFR 1026.3
2. Consumer Financial Protection Bureau, Regulation Z Official Interpretations to 1026.3
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 for Retirees Living on Fixed Income
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.