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Asset Depletion Mortgages – A Guide for High-Net-Worth Borrowers

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An asset depletion mortgage, also known as an asset-based mortgage or asset dissipation loan, is a type of mortgage that considers the borrower's assets in addition to their income. This mortgage option is particularly useful for borrowers who may not have a regular income but have substantial assets. To qualify for an asset depletion mortgage, you need to meet certain requirements.

  1. Sufficient assets: You need to have substantial assets to qualify for this type of mortgage. This can include checking and savings accounts, retirement accounts, stocks, bonds, mutual funds, and other investment accounts. The exact amount you need will depend on the lender's specific guidelines and the amount you want to borrow.

  2. Credit score: Lenders typically require a good to excellent credit score to approve an asset depletion mortgage. The minimum credit score may vary between lenders, but it usually falls in the range of 680-740. A higher credit score will increase your chances of approval and potentially result in better loan terms.

  3. Down payment: You'll need to have a down payment ready for the purchase of the property. Depending on the lender's requirements, this can range from 10% to 30% or more of the home's value. Having a larger down payment may help you get better loan terms and make it easier to qualify for an asset depletion mortgage.

  4. Debt-to-income ratio (DTI): Although the focus of an asset depletion mortgage is on your assets, lenders will still consider your debt-to-income ratio. It's essential to maintain a low DTI, ideally below 43%. This shows the lender that you can manage your debts responsibly and are not overextended.

  5. Asset depletion calculation: Lenders use a specific formula to calculate your asset depletion income. This typically involves dividing your total assets by a set number of months, usually 360 months (30 years). This calculated amount is then added to your other sources of income to determine if you can afford the mortgage payments.

  6. Proof of assets: Be prepared to provide documentation to verify your assets. This may include bank statements, brokerage account statements, retirement account statements, and other relevant documents.

  7. Stable employment history: While an asset depletion mortgage focuses on your assets, it's still essential to demonstrate a stable employment history to your lender. This will assure them that you have the ability to repay the loan.

  8. Shop around: Different lenders have different guidelines and requirements for asset depletion mortgages. It's important to shop around and find the best fit for your situation.

Remember that each lender may have its specific requirements, and some may not offer asset depletion mortgages at all. Be sure to speak with a mortgage professional or financial advisor to help you understand your options and find the best mortgage solution for your needs.

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