Calculate Asset Depletion Income After Haircuts — The Quick Read: Asset depletion income comes from a five-step process: count eligible liquid assets, apply a haircut to riskier account types, subtract money earmarked for the deal itself, divide what’s left by a program’s divisor, and treat that result as monthly income. The haircut and the divisor are the two levers that move the number the most, and they vary by program, not by law.
There’s no federal formula for this. The Consumer Financial Protection Bureau’s own rulemaking dropped the old Appendix Q income-and-debt checklist and replaced it with a much looser standard — creditors must simply consider and verify a consumer’s current or reasonably expected income or assets. That leaves the actual math — haircuts, divisors, which accounts count — up to individual lenders. Understand how those pieces fit together and you can estimate your own number before a lender ever runs it.
Key Terms Defined
Asset depletion (or asset utilization): a way to turn liquid savings into a hypothetical monthly income figure for loan qualification, instead of using pay stubs or traditional personal-income documentation.
Haircut: a discount applied to an asset’s stated balance before it’s counted, meant to buffer market swings, taxes, or early-withdrawal penalties.
Divisor: the number of months a program divides your net eligible assets by to produce the monthly income figure. Shorter divisor, bigger income number — same asset pool.
PITIA: the full monthly housing obligation — principal, interest, taxes, insurance, and any association dues.
DSCR (debt-service coverage ratio): on a rental property, this is the property’s rent divided by its PITIA — a separate calculation from personal income that doesn’t involve asset depletion at all.
Step 1: Which Assets Actually Count
Cash counts close to full value; everything else gets discounted before it’s usable. Checking, savings, CDs, and money market balances are treated as near-cash — little or no haircut. Stocks, bonds, and mutual funds get discounted to buffer volatility. Retirement accounts get the heaviest scrutiny, and the discount usually depends on your age.
Business equity, unvested stock, and real estate equity generally don’t qualify at all — the method needs assets that are verifiable and liquid without a sale. That’s a real gap for rental investors: a portfolio’s biggest asset is often the properties themselves, and none of that equity feeds an asset depletion calculation. It’s one reason cash-out refinancing on existing rentals ends up being the more direct path for investors whose net worth sits in real estate rather than a brokerage account.
Step 2: Why the Retirement-Account Haircut Depends On Your Age
The retirement-account discount tracks a real tax cost, not a lending rule. The IRS applies a 10% additional tax on early distributions taken before age 59½, unless an exception applies. Lenders price that penalty risk into the haircut — heavier discount under 59½, lighter above it — even though nothing is actually being withdrawn.
In the asset allowance path used across select lenders in Lendmire’s wholesale network, retirement accounts typically count at 70% of value. That figure steps up to 80% once the borrower is 59½ or older. This is a program-specific figure, not a universal one. Lenders in other channels will land on different numbers. You should never assume one lender’s haircut applies at another.
Step 3: Subtract What the Deal Itself Needs
Before you divide anything, pull out the money the transaction will actually consume. Funds earmarked for down payment, closing costs, and required reserves come off the top — they’re not available to generate income, because they’re already spoken for. Only what’s left after those deductions is “net eligible assets,” and that’s the number that goes into the divisor.
This step trips people up more than any other. Skipping it — dividing the full asset balance instead of the post-deduction balance — inflates the income figure and sets up a mismatch when the actual underwriting file gets built.
Step 4: The Divisor Decides More Than the Balance Does
The divisor is the single biggest lever in the whole calculation — a shorter divisor produces a bigger monthly income figure from the exact same asset pool. A $500,000 net asset balance divided by 60 months produces roughly double the monthly income of that same balance divided by 120 months. That’s why comparing programs by divisor matters as much as comparing what they’ll count as an eligible asset in the first place.
Across select lenders in Lendmire’s wholesale network, the asset allowance path uses three different divisors depending on the file: 36 months when used to supplement other income and debt-to-income sits at or below 60%, 60 months when supplementing above that DTI threshold, and 84 months when it’s the sole qualifying source or the loan amount runs above $3,500,000. That range alone shows how much the same asset pool can swing in reported income just by changing which divisor applies to the file.
There’s also an assets-only path with no DTI calculation at all, but it needs liquid U.S. assets equal to the full loan amount, plus closing costs, plus sixty months of coverage for any net loss on other residential property the borrower owns. That’s a much higher liquidity bar, and it exists for a different kind of borrower — someone who wants underwriting built entirely around what they hold, not what a formula turns that holding into.
Step 5: The Resulting Figure Becomes “Monthly Income” — With a Catch
Once you’ve divided, the resulting number gets treated like monthly income for qualification purposes. On most loan types, that feeds into a standard debt-to-income calculation. On a DSCR loan, it usually doesn’t touch the coverage ratio at all.
That surprises a lot of investors moving from conventional financing into the DSCR space. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines — the ratio is the property’s rent divided by its PITIA, full stop. Personal income and personal assets don’t factor into that ratio. What asset depletion (or simply documented liquidity) does on a DSCR file is satisfy the reserve requirement layered on top of the coverage test — it’s a liquidity solver, not a rent-coverage solver. Lendmire’s complete DSCR loans guide walks through how that coverage ratio actually gets built if you want the full picture.
Where This Goes Wrong: Five Common Mistakes
- Assuming one universal haircut percentage. There isn’t one. Every program sets its own discount by asset class, and no single range applies across the board.
- Dividing the full balance instead of the net balance. Skipping the down payment, closing cost, and reserve deduction inflates the number and creates a mismatch later.
- Ignoring age thresholds on retirement accounts. The haircut can change meaningfully depending on which side of 59½ you’re on.
- Treating a bigger asset pool as automatically better. The divisor moves the outcome more than the balance does — a smaller pool on a short divisor can outproduce a larger pool on a long one.
- Assuming asset depletion boosts a DSCR file’s coverage ratio. It doesn’t. It supports reserves and liquidity, not the rent-to-payment math.
Does Asset Depletion Require Selling Anything?
No. Asset depletion is just a paperwork exercise. It’s not a liquidation requirement. The calculation is built entirely on your statements. Nothing gets sold, withdrawn, or pledged to produce the qualifying income figure. That’s part of why it appeals to retirees and high-net-worth borrowers. They don’t want to disrupt a portfolio just to qualify for a mortgage. As Scotsman Guide puts it, asset depletion mortgages let asset-rich households turn idle brokerage and retirement balances into attributed income while keeping their liquidity intact. That’s a different use case from DSCR loans, which qualify investors off property cash flow rather than personal balance sheets.
Can Asset Depletion Income Be Combined With Other Income?
Sometimes — it’s program-specific, not universal. Some lenders will blend asset depletion income with wage or self-employment income on the same file. Others require it to stand alone as the sole qualifying source. In the asset allowance structure used in Lendmire’s wholesale network, the divisor itself changes depending on whether it’s supplementing other income or acting as the sole source — 36 or 60 months when supplementing, 84 months when standalone — so the “can I combine it” question and the “which divisor applies” question are really the same question asked two ways.
One thing stays consistent across the market: you generally can’t double-count the same assets. Say a brokerage account is already generating dividend income you’re claiming separately. Most programs won’t let that same account also produce asset depletion income. The dollars can’t do double duty.
Who This Fits and Who It Doesn’t
Asset depletion tends to fit retirees, founders who’ve sold a business, and high-net-worth borrowers sitting on liquid brokerage or retirement balances with modest reported income. It fits less well for someone whose net worth is mostly real estate equity. That equity doesn’t count toward the calculation at all. A DSCR purchase or cash-out refinance on the rental itself is usually the more direct route instead. Asset depletion also doesn’t help a marginal DSCR file on a specific property. It can’t move a coverage ratio that’s driven entirely by appraised rent against PITIA.
Across files seen through Lendmire’s wholesale network, some borrowers get more out of asset depletion than others. The ones who benefit most come in with clean, seasoned statements up front. That means multiple consecutive months, no unexplained large deposits, and no recent transfers that look like a balance was staged for the calculation. Underwriters read seasoning gaps as red flags. A thin documentation trail slows everything down, no matter how strong the underlying assets actually are.
For scale, select programs in Lendmire’s network run from $300,000 to $30,000,000 through two separate ladders — a portfolio non-QM program to $6,000,000, and a bank portfolio program carrying twelve-month statement files to $30,000,000 with its own leverage steps: 65% to $5,000,000, 60% to $10,000,000, and 55% up to $30,000,000, interest-only capped at 60% or the band ceiling, whichever is lower. Every figure above $4,000,000 is reviewed case by case before submission. Consumer mortgage lending through Lendmire is licensed in 16 states.
This is not legal or tax advice. Asset depletion calculations, retirement-account penalties, and how a given loan program treats your specific assets can vary by lender, by state, and by individual circumstances. Speak with a qualified tax professional or attorney about your own situation before relying on any of this to plan a purchase or refinance.
Frequently Asked Questions
Does real estate equity count toward asset depletion income?
No. The method depends on liquid, verifiable assets like cash, brokerage balances, and retirement accounts. Equity in owned property doesn’t feed the calculation, which is why investors whose wealth sits mostly in real estate often look at a DSCR cash-out refinance instead.
Is there a minimum credit score for asset depletion programs?
It depends on the program and the loan size. Across select lenders in Lendmire’s wholesale network, portfolio programs typically start around a 660 floor, stepping up to 700 or higher above certain loan-size thresholds — always subject to full underwriting.
Can cryptocurrency count as an eligible asset?
Generally, no. Most programs, including those in Lendmire’s network, exclude cryptocurrency along with business funds, gifts, and unvested stock from the eligible-asset pool.
Does asset depletion income affect a DSCR loan’s coverage ratio?
No. DSCR coverage is calculated from the property’s rent against its PITIA, independent of personal assets or income. Asset depletion on a DSCR file typically supports reserve requirements instead.
What happens if I’m under age 59½?
Retirement accounts usually take a bigger haircut before that age, reflecting the IRS’s 10% early-withdrawal tax exposure. Once you clear 59½, many programs count a larger share of the same balance.
If you’re weighing a purchase or refinance and want to see how a property’s rental income and your own liquidity might work together, Lendmire can help. We compare loan options based on the property’s cash flow, your credit profile, available leverage, and your broader investment goals.
Investors who want the broader program framework can review how DSCR loans work.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Self-employed borrowers can compare both super jumbo programs on Lendmire’s self-employed mortgages page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
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References
1. CFPB official newsroom release
2. IRS — Retirement plans FAQs on IRA distributions
3. Scotsman Guide — Which Groups Are Driving Non-QM Lending
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.
