Asset Depletion Mortgage
Asset Depletion Mortgage is a method for calculating monthly income by dividing a borrower’s total assets by a set number of months. The borrower is not required to cash in their assets as they’re only used to demonstrate an ability to make the mortgage and housing payments.
Borrowers who use an asset depletion mortgage program to qualify do not need to show any source of income or employment. They can instead rely on asset depletion calculations based on a combination of cash, retirement, and investment monies divided by 360 payments. Assets are generally qualified with 100% of cash accounts and 70% of retirement and investment accounts (100% of retirement funds may be used if the borrower is over 59 ½ years old).
If you are self-employed and you expense your adjusted gross income to the point you cannot qualify for a traditional loan, but have considerable assets, you can use those assets for qualifying purposes. Asset Depletion Mortgage is the solution.
- Example – borrower is 73 years old:
- Borrower’s income is $5,000/month /DTI is high…needs additional income to qualify
- Borrower has $1,000,000 “liquid” assets
- Mortgage calculation based on the borrower’s age:
- Present Value = 1,000,000
- Rate = 5.000%
- Amortization = 12 years/The borrower is 73 years old
- Result: $9,249/month additional income for qualifying purposes
Borrower now has $5,000 income + $9,249 = $14,249 to qualify with