The Quick Read: On an asset depletion mortgage, a margin balance is treated as debt. The underwriter subtracts it from your brokerage account first and counts only the equity that remains. The program’s percentage for securities then applies to that smaller number. Treatment comes from each lender’s written policy, because no regulator publishes a margin-specific formula.
- A margin balance is borrowed money, so it is never counted as an asset.
- Equity is market value minus the debit balance, and equity is the starting figure.
- On the depletion path, each dollar of margin debt cuts the counted pool by the securities percentage, which is 80 cents.
- On the qualifier path, equity is compared directly with the loan amount, so margin debt cuts eligibility one-for-one.
- An account with a zero debit is simply a brokerage account, and nothing is netted.
If you hold a large portfolio and lean on margin, read your statement before you read any program sheet. The number printed at the top is rarely the number a lender uses.
What Does a Margin Balance Look Like on Your Statement?
A brokerage statement shows two figures that matter here: the gross market value of your holdings and the debit balance you owe the broker. Your equity is the first minus the second. Underwriters start from equity, not from the gross figure at the top of the page.
Picture a statement with three lines:
- Market value of securities: $450,000.
- Margin debit balance: $120,000.
- Equity: $330,000.
A borrower who reads only the first line believes the account is worth $450,000. The lender sees $330,000. That gap of $120,000 is the whole topic of this article.
Lendmire is a mortgage broker, and this netting step shows up on file after file. The debit balance sits on the same page as the holdings, so the underwriter does not have to guess. Lendmire’s own piece How to Use a Margin Account in an Asset Depletion Mortgage covers the borrower-side strategy. This article covers the mechanics.
Key Terms Defined
Asset depletion mortgage: A consumer mortgage where eligible assets, after percentage adjustments, are converted into a monthly qualifying income by dividing by 60 months.
Asset qualifier path: A structure where eligible assets must equal or exceed the entire loan amount, and no employment or income is documented.
Asset depletion path: A structure where usable assets become a monthly qualifying income that runs through the debt-to-income test, which compares monthly debts with income.
Margin balance (debit balance): The amount you have borrowed from your broker against the securities in the account.
Equity: The market value of the account minus the margin debit. It is the part of the account that is actually yours.
Haircut: The share of an asset’s value a lender will not count, to allow for price swings or limited access. Securities at 80% carry a 20% haircut.
Seasoning: How long assets must have been in your account, shown by statements, before a lender counts them.
Which Path Are You On?
Your path decides how a margin balance hurts you. A borrower is qualified on one path at a time, and the two paths use different tables.
On the qualifier path, eligible assets must cover the entire loan. Through select programs, leverage runs up to 80% on a purchase and 75% on a refinance, on a principal residence or second home, subject to underwriting. Brokerage accounts count at 100%.
On the depletion path, assets become income. Securities count at 80%, cash and certificates of deposit at 100%, retirement accounts at 70%, and real-estate equity at 60%. Usable assets are divided by 60 months. Leverage runs up to 80% on a purchase or rate-and-term refinance for a principal residence or second home, and up to 65% on a purchase or rate-and-term refinance for an investment property, subject to underwriting. Cash-out refinances top out at 60% on the depletion path. Cash-out proceeds never count as qualifying assets.
Margin debt matters on both. It works differently on each, as the next sections show.
How Does the Underwriter Net the Account, Step by Step?
The lender removes the margin debit before it applies any percentage. Here is the sequence most programs across the wholesale network follow, though each lender’s own calculation governs.
1. Collect statements. On the depletion path, statements must be at least 120 days old at application, plus one dated within 45 days. On the qualifier path, expect 60 days of seasoning and two months of statements for each account.
2. Read two numbers. The underwriter pulls gross market value and the debit balance from each statement.
3. Net the account. Equity equals market value minus the debit. SoFi’s investor-education page on Regulation T defines margin equity the same way: securities value less the amount owed to the brokerage.
4. Apply the asset percentage to equity. On the depletion path, securities count at 80%. On the qualifier path, brokerage accounts count at 100%.
5. Subtract funds committed to the deal. Many programs take out the down payment and closing costs before the pool is final.
6. Divide by 60 on the depletion path. The result is monthly qualifying income. On the qualifier path, skip this step and compare usable assets with the loan amount.
7. Run the test. The depletion path sends the income through debt-to-income. The qualifier path asks whether assets cover the loan.
Order matters. Netting happens before the percentage. That means margin debt reduces the counted pool by the same percentage as the securities it is borrowed against. On a securities account counted at 80%, each dollar of debt costs you 80 cents of usable assets.
What Does the Math Look Like With and Without Margin?
Here is a side-by-side on the depletion path. These are illustrative round numbers, and the lender’s own calculation governs.
| Line | No margin | With margin debit |
|---|---|---|
| Securities market value | $2,000,000 | $2,000,000 |
| Margin debit | none | $500,000 |
| Equity | $2,000,000 | $1,500,000 |
| Securities counted at 80% | $1,600,000 | $1,200,000 |
| Cash counted at 100% | $300,000 | $300,000 |
| Usable assets | $1,900,000 | $1,500,000 |
| Divided by 60 months | about $31,700 | $25,000 |
The portfolio is the same. The debit alone removes $400,000 of usable assets and about $6,700 of monthly qualifying income. That income must still carry the housing payment and other debts through the debt-to-income test.
The qualifier path is harsher. Take an $800,000 loan with a brokerage statement showing $450,000 of market value and a $120,000 debit. Equity is $330,000, counted at 100%. Add $270,000 from a 401(k) under age 59½ at 90% (on a $300,000 balance) and $200,000 in savings at 100%. Usable assets total $800,000, which covers the loan on assets alone, subject to underwriting. Skip the netting and the file would look $120,000 stronger than it is. Take away a little more equity and it no longer covers the loan.
Because the qualifier path compares assets with the loan amount directly, every dollar of margin debt cuts eligibility dollar for dollar. On the depletion path, the minimum-assets rule works the same way. Qualified assets must be at least 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. Those tests use netted figures.
Why Do Lenders Net Margin Debt at All?
Lenders net it because borrowed money is not owned wealth. A pool built on a lender’s own logic of accessible, liquid, owned assets cannot include money that already belongs to the broker.
There is no margin-specific rule to point to. The OCC’s bulletin on asset dissipation underwriting describes the method as using an applicant’s assets to calculate a hypothetical cash annuity stream. It gives no formula. It expects lenders to set their own policy on eligible assets and discounts, based on quality, liquidity, and accessibility. The OCC bulletin is written for banks and says nothing about margin. Netting is an application of that logic through lender convention, and it is a documentation detail more than a published rule.
Risk is the second reason. Margin accounts carry forced-sale exposure. Federal rules set initial margin at 50% for most equities, and FINRA Rule 4210 sets maintenance at 25% of market value on long positions, as SoFi’s explainer summarizes. Brokerages can set stricter house limits. If equity falls below the maintenance level, Fidelity’s margin disclosure says the broker may sell pledged securities when the borrower cannot meet a call. A lender can reasonably conclude that a leveraged account is a less stable asset. That is reasoning, not a published lender statement.
Where Does the General Rule Bend?
The netting rule is steady. The edge cases are where files get messy.
A zero debit. A margin-enabled account with nothing drawn is just a brokerage account. The risk to your asset count is the debit balance, not the margin feature. Nothing is netted when the balance is zero.
A small debit. A small debit nets the same way, just with less impact. Do the math on equity anyway, because a small number still sits on the first line of the file.
Multiple accounts. Accounts combine, but each is netted on its own statement. A debit in one account does not get absorbed by surplus equity elsewhere in the paperwork. Run the figures account by account.
Securities-backed lines. A bank-issued securities-backed line of credit is a separate product from a broker margin loan. Schwab’s investor-education page describes the assets as pledged collateral held in a separate brokerage account. Across the network, practitioners generally treat both as borrowing against securities, so the drawn balance comes off the same way. Treatment of an undrawn but executed line varies. Some lenders still discount it, and others ignore it.
Margin proceeds sitting in a bank account. Borrowed funds and funds pledged against a loan are not published as eligible on either path. The documented route is converting assets to a seasoned cash balance in a regulated account, with the source reviewed by the lender. Whether margin proceeds can follow that route depends on the program, so ask before you move money.
Margin interest in the debt-to-income test. If the account carries a recurring margin payment, a lender may count it as a monthly obligation on the depletion path. Practice varies, and it is worth asking up front.
Haircuts for margin itself. No program published to the network applies a separate haircut to margin. Treat it as netting, not as a penalty percentage.
Can You Pay Down the Balance Before You Apply?
Sometimes, but the math is less obvious than it looks. Where the money comes from decides whether paying down helps.
Take the table above. Suppose you pay $100,000 of the margin debit from your cash. Equity rises to $1,600,000, which counts at 80% for $1,280,000. Cash drops to $200,000, counted at 100%. Usable assets become $1,480,000, which is $20,000 lower than before. Cash counted fully, and equity counted at 80%, means swapping one for the other loses a little ground on the depletion path.
On the qualifier path both asset types count at 100%, so the same paydown is a wash on the asset total. It can still help by lowering the debt that sits on the statement.
Paying down from an asset that counts for less, or that does not count at all, is different. That is where a paydown can improve the pool. Selling securities to do it raises its own questions: the securities leave the pool, and recent large movements need documented sources. Tax treatment varies, so consult a qualified tax professional before selling securities to pay down a balance.
Model your pool on net equity, not statement totals, before you commit to any structure.
What About Rental Investors and DSCR?
For a pure rental purchase, a margin balance usually does not matter. DSCR stands for debt service coverage ratio, which compares a property’s rent with its full monthly obligation. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, so your brokerage statement is a side issue.
The two tools do different jobs. Asset depletion is reviewed against liquid assets, including on an investment property at up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out, through select programs. DSCR qualifies the rental on its own rent. Some wholesale programs may weigh strong liquid assets as a compensating factor on a thin-coverage file. In that case, netted equity is the number that counts.
If you carry margin and plan to buy rentals, ask which structure fits the property. Lendmire’s complete DSCR loans guide walks through the property-income side. For a primary home or second home, asset depletion may fit better.
Common Mistakes That Shrink the Pool
- Using the statement total as your asset number. The lender nets the debit first.
- Treating margin as extra liquidity. It is a liability, not an asset.
- Forgetting that down payment and closing funds come out. They leave the pool before you divide.
- Assuming one national rule. The OCC leaves the formula to each lender, so percentages and divisors differ by program.
- Assuming asset depletion means selling investments. The method is a qualifying calculation. Nothing is liquidated.
- Moving money at the last minute. Statements must show seasoned balances, and sudden transfers invite questions.
Frequently Asked Questions
Does a margin balance reduce the assets that count on an asset depletion mortgage?
Yes, whenever the account carries a debit. The underwriter subtracts the debit from market value and works from the equity. On the depletion path, the securities percentage of 80% then applies to that equity. Subject to underwriting, the lender’s own calculation governs.
Is a margin account with no balance a problem?
No. An account with a zero debit is treated as an ordinary brokerage account. The risk to your count comes from the debit balance, not from having margin enabled. Statements still need to meet the seasoning and recency rules for your path.
Is the netting rule written down anywhere?
Not as a margin-specific rule. Regulators leave the formula to lenders, so treatment comes from each lender’s written policy and from convention. The percentages differ by program, and Lendmire arranges files through select lenders in its network, each underwritten individually.
Does margin debt hurt more on the qualifier path or the depletion path?
It hurts one-for-one on the qualifier path, where equity is compared directly with the loan amount. On the depletion path, each dollar of debt removes the securities percentage, 80 cents, from the pool. The depletion path also runs the result through debt-to-income and the minimum-assets rule.
Can margin proceeds fund my down payment or reserves?
It depends on the program. Borrowed funds are not published as eligible assets on either path. The documented route is a seasoned cash balance in a regulated account with a reviewed source. Ask before you move any money.
If You Are Qualifying on Assets Instead of 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 broker that arranges financing through select lenders, so every figure here is a typical range, subject to underwriting and not a commitment to lend. Call 828-256-2183 or request a quote to start.
Whatever your structure, the account that carries a margin balance is the one to size on equity, because a market drop does not wait for a closing.
For current guidelines and terms, see Lendmire’s asset-based mortgage programs page.
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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References
4. Fidelity: Borrowing on Margin
5. Schwab Learn: 3 Ways to Borrow Against Your Assets
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does an Asset Depletion Loan Require Any Income? · How an Asset Depletion Mortgage Works · How Big Can an Asset Qualifier Mortgage Be?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.