The Quick Read: The program that fits is the one that judges your balance sheet instead of your return, and for a cash-out refinance that usually means the asset depletion path, where eligible assets are converted into monthly qualifying income, subject to underwriting.
- The asset depletion path allows cash-out on a principal residence, second home or investment property, at up to 60% loan-to-value in each case.
- Eligible assets are divided by 60 months to produce qualifying income, so a tax loss on the return does not enter the calculation.
- Cash-out proceeds never count as qualifying assets, and you need the assets in place before you apply.
- The file requires no traditional personal-income documentation, pay stubs or employment verification, but it is fully underwritten, with every account documented by statements.
- The best program for your situation depends on the property type, the asset mix and how much cash you need.
Key Terms Defined
Asset qualifier path: the route where eligible assets, after credit percentages, must equal or exceed the entire loan amount, with no income documented.
Asset depletion path: the route where eligible assets, after haircuts, are divided by 60 months into monthly qualifying income that must carry the housing payment and other debts.
Haircut: the share of an account’s balance a program discounts because the asset can lose value or be hard to reach.
Seasoning: how long funds must sit in your accounts, shown by statements, before they count.
Paper loss: a loss on your return created by non-cash deductions such as depreciation, not by cash leaving your accounts.
What “Asset-Based” Means Here
Asset-based, here, means a mortgage qualified on documented assets instead of tax-return income. It does not mean a loan secured by a pledged portfolio. The collateral is still the property.
Lendmire is a mortgage broker, and its asset-based mortgage programs are placed through select lenders in its wholesale network, with consumer lending licensed in 16 states. A borrower is qualified on one path at a time, and the two paths never blend.
| Factor | Asset qualifier path | Asset depletion path |
|---|---|---|
| How assets are used | Must cover the whole loan | Become monthly income |
| Income documented | None | Derived from assets |
| Debt-to-income test | Not applied to income | Applied to derived income |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
| Cash-out | Set by the lender, not published | 60% LTV |
The qualifier path is strong for purchases and refinances on a principal residence or second home. It allows up to 80% loan-to-value on a purchase and 75% on a refinance. Whether cash-out is allowed there, and at what leverage, is the lender’s call and is not published, so any program that promises a qualifier-path cash-out figure up front should be treated with caution. For a borrower who wants cash out of a property, the depletion path is the one with published terms.
Why a Loss on Your Return Is Often Not What It Looks Like
A loss on a tax return frequently reflects depreciation and interest, not cash leaving your accounts. IRS Publication 527 says rental income and expenses go on Schedule E, and that depreciation is claimed there. A current Schedule E walkthrough from McKee & Company places depreciation on line 18 and notes that the passive-activity rules can limit a loss on line 22.
That matters because return-based underwriting reads those lines directly. A lender that underwrites on tax-return income takes the loss at face value, even when the property throws off positive cash. Asset-based underwriting does not read Schedule E at all.
Not every loss is a paper loss, though, and the two point toward different programs.
| Type of loss | What it usually means | Likely path |
|---|---|---|
| Depreciation-driven | Cash is fine; return looks weak | Depletion path, or a rental-coverage route |
| Operating loss | Real cash is leaving the business | Depletion path only if assets are strong |
| Passive-limited loss | Deduction is deferred, not lost | Depletion path |
The test on this path is not whether the loss is paper or real. It is whether your documented assets are large enough, after haircuts, to carry the new loan. A real operating loss does not disqualify a file, but it should make you more careful about whether the payment is sustainable.
Can You Actually Take Cash Out on This Program?
Yes, on the asset depletion path, through select programs and subject to underwriting. The principal residence and second home are capped at 60% loan-to-value on a cash-out refinance. An investment property is also capped at 60% on a cash-out refinance.
Those caps sit below the depletion path’s own ceilings on other transactions. A principal residence or second home can reach 80% on a purchase or rate-and-term refinance, and an investment property can reach 65% on those same transactions. Taking cash out costs you leverage, so the amount you can pull is often smaller than the equity you hold.
One rule catches people out. Cash-out proceeds never count as qualifying assets. If your plan is to refinance, then use the proceeds to prop up the assets that qualify you, the file will not work. The assets you show need to be there before the loan.
How Assets Become Income
On the depletion path, usable assets divided by 60 months equals monthly qualifying income. That income then runs through the debt-to-income test, carrying the full housing payment and your other debts.
Here is the arithmetic, which is illustrative only. The lender’s own calculation governs.
- $1,500,000 in securities counts at 80%, which is $1,200,000.
- $300,000 in cash counts at 100%, which is $300,000.
- Usable assets total $1,500,000, and dividing by 60 months gives $25,000 of monthly qualifying income.
That figure then has to cover the housing payment and other monthly debts under the program’s debt-to-income test. The tax return never appears. A borrower with a deeply negative Schedule E and a large portfolio can show strong qualifying income, while a borrower with modest assets and a high payment may not.
The depletion path also has minimums. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. When asset depletion is the only income source, assets must never fall below $250,000 liquid. If you also have documented income, asset-derived income can supplement it, up to a 45% debt-to-income ratio, and in that case the minimum-assets rule is waived.
Which Assets Count and at What Percentage
Percentages differ by path, so name the path whenever a figure appears.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Brokerage accounts | 100% | 80% (securities) |
| Cash, savings, money market | 100% | 100% (cash accounts) |
| Certificates of deposit | 100% | 100% |
| Retirement accounts | 90% under 59½, 100% after | 70% at any age |
| Real-estate equity | Not published | 60% |
Qualifier-path accounts combine. Here is a quick illustration of that path. An $800,000 loan with $330,000 in brokerage accounts (100%, so $330,000), $300,000 in a 401(k) under age 59½ (90%, so $270,000) and $200,000 in savings (100%, so $200,000) counts $800,000 of usable assets and is reviewed on assets alone.
Several asset types do not count on the depletion path at all: 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. Cryptocurrency, precious metals, collectibles and pledged or borrowed funds are not published as eligible on either path. The documented route for those is converting them to a seasoned cash balance in a regulated account, with the source reviewed by the lender.
Three Borrower Profiles
The landlord with depreciation losses. Picture an investor with several rentals whose return shows a loss from depreciation and mortgage interest, but who holds a large brokerage account. The depletion path can treat that account as income, with the investment property capped at 60% on a cash-out. The catch is that this path is built around assets, not rent. An investor whose assets are thin but whose rents are strong should look at a rental-coverage program instead, which tests the property’s rent against its payment.
The operating-business owner with a real loss. Say a business owner’s company lost money last year, dragging the personal return negative, but the owner holds cash and public securities outside the business. Those liquid holdings can support the depletion path. Money tied up in the business does not count toward assets, and a stressed business raises the question of whether the payment is sustainable in a bad year.
The portfolio-rich retiree. Consider a retiree living on a portfolio, with little reportable income and a large retirement account. On the depletion path the retirement account counts at 70% at any age. On the qualifier path it counts at 90% before 59½ and 100% after. A retiree who wants cash from a principal residence will find the depletion path’s 60% cash-out cap the binding limit. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Where the General Rule Breaks
Privately held company stock. It is not an eligible asset on either path. A founder or shareholder qualifies through documented liquid assets: seasoned proceeds from a sale or conversion, cash, public securities and retirement accounts, each at its own percentage.
Recent sale-of-business, inheritance or settlement funds. On the depletion path these funds are excused from the 120-day statement requirement. That helps a borrower who just received a lump sum, since the money does not have to sit before it counts.
First-time investors. A first-time investor on the depletion path needs a 700 credit score. Other borrowers follow the lender’s score and loan-amount matrix on that path. The qualifier path’s published floor is 600. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Housing events and late payments. The housing history standard is 0x30x12, with one 30-day late in the last twelve months considered case by case. Multiple bankruptcies are not eligible, and a housing event needs four years of seasoning on the depletion path.
Loan size. The depletion path stops at $3,500,000, and the qualifier path stops at $4,000,000. A borrower who needs more should not expect either path to stretch.
Rent and short-term-rental questions. These belong to rental-coverage underwriting, not to this program. If your plan depends on projected rent covering the payment, you are in a different conversation. 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.
What the Lender Still Asks For
“No tax returns” does not mean no documentation. It means a different document set.
- Statements for every account counted, with the seasoning the path requires.
- Credit review and housing history.
- An appraisal and title work on the property.
- Proof of how the assets are owned, since accounts must belong to the borrower.
- For an investment property, entity or ownership documents where the lender asks.
On the qualifier path, expect 60 days of seasoning and two months of statements per qualifying account. On the depletion path, expect statements at least 120 days old at application plus the most recent statement within 45 days.
The investment-property version is a business-purpose loan. Under Regulation Z, credit to acquire, improve or maintain non-owner-occupied rental property is deemed business-purpose. This is part of why such loans are reviewed differently from an owner-occupied mortgage. The principal residence and second-home versions are consumer mortgages.
Costs, Risks and When Not to Do This
- The new loan is larger, so your payment rises and your debt-to-income picture tightens.
- Depletion math assumes your assets stay where they are. A drop in the market value of securities shrinks the income the file relies on.
- A paper loss on your return is not a signal that cash flow is healthy. Check the cash behind the property before borrowing against it.
- If you plan to spend the proceeds on something that will not produce income, ask whether the payment still fits your life once you are no longer living on the portfolio.
- Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
Skip this route if you do not have the assets. A borrower with little liquid wealth is better served by a rental-coverage program, a bank-statement program or a conventional file.
Choosing the Program for Your Situation
The right program depends on four things: property type, the asset mix, how much cash you need and whether your goal is stability or leverage. A broker that shops multiple wholesale lenders can match your statements to the program that tests them most favorably. The strictest overlays want more seasoning, and a few lenders in the network accept more combinations of accounts.
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 or request a quote. Qualification is subject to underwriting and this is not a commitment to lend.
Frequently Asked Questions
Can I use asset depletion for a cash-out refinance, or only for a purchase?
Yes, the asset depletion path allows cash-out on a principal residence, second home or investment property, at up to 60% loan-to-value, subject to underwriting. On the qualifier path, whether cash-out is allowed and at what leverage is set by the lender and is not published. Cash-out proceeds never count as qualifying assets on either path.
Does a tax loss hurt my chances on this program?
No, because the loss does not enter the calculation. The depletion path converts eligible assets into monthly income, and the asset qualifier path tests whether assets cover the whole loan. The file still involves a full credit review, an appraisal and statements for every account counted.
Does my privately held company stock count as an asset?
The documented route is a sale or buyout converted to a seasoned cash balance, or other liquid assets such as cash, public securities and retirement accounts at their percentages.
Do I have to sell my investments to qualify?
No. Assets are counted, not liquidated. Securities count at 80% on the depletion path, and retirement accounts count at 70% at any age. Your holdings stay where they are, though a decline in their value changes the income the file shows.
Is this the same as a rental-coverage loan?
No. A rental-coverage program tests whether the property’s rent covers its payment, and it works for investors with strong rents and thin assets. An asset-based file tests your documented balance sheet. Which is better depends on whether your strength is the property or the portfolio.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages for self-employed and high-net-worth borrowers are arranged through wholesale lenders on primary residences, second homes and investment properties; every file is underwritten by the lender under its program 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
2. McKee & Company, Schedule E Rental Income and Expenses
3. CFPB, Regulation Z § 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: How Much Cash Can a New Mexico Homeowner Take Out on an Asset Depletion Refinance? · Can You Get an Asset-Based Mortgage on a Tennessee Condo? · Can You Cash Out a Texas Home on an Asset Depletion Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.