Asset Depletion Loans: Qualify Using Your Assets as Income

What is an asset depletion loan?

An asset depletion loan — also called an asset-qualifier or asset-based mortgage — lets you qualify using your liquid assets as if they were income. Instead of verifying a paycheck, the lender counts your eligible savings, investment, and retirement balances, spreads them across a defined period, and converts the total into a monthly qualifying figure.

The crucial point is in the name: nothing actually gets “depleted.” You do not liquidate your accounts, pledge them, or hand them to the lender. The depletion is purely a calculation — a way to translate a large balance sheet into the monthly income number that underwriting needs. You keep your money and continue investing it exactly as before.

This makes asset depletion one of the most elegant tools in the alternative documentation loans family. For a borrower who is wealthy on paper but earns little documentable income, it answers the underwriter’s only real question — “can this person cover the payment?” — using the very assets that prove they can.

How does asset depletion calculate my income?

The lender totals your eligible liquid assets, sometimes discounts them, then divides by a set number of months — commonly ranging from roughly 60 up to 360 depending on the program — to produce a monthly qualifying income. The divisor is the single biggest driver of how much income your assets generate.

Here is the mechanic step by step:

1. Add up eligible assets. Checking, savings, money market, and non-retirement brokerage accounts usually count in full or near full. Retirement accounts (401k, IRA) are often counted at a reduced percentage — frequently around 70% — to account for taxes and early-withdrawal considerations, and additional haircuts may apply if you are under retirement age.
2. Apply any discount. Some programs shave a percentage off volatile assets like stocks before counting them.
3. Subtract funds needed for the deal. Money used for the down payment, closing costs, and required reserves is typically removed first, so only the remaining assets are “depleted” into income.
4. Divide by the program’s months. A program that divides by 240 months produces twice the monthly income of one that divides by 360. Shorter divisors create more income but are less common.

A simplified example: suppose you have $1,500,000 in eligible assets after setting aside your down payment and reserves. A program dividing by 240 months would credit you with $6,250 a month of qualifying income; a program dividing by 360 would credit $4,166. Same assets, very different approval — which is why matching you to the right program is the whole job.

Who qualifies for an asset depletion loan?

Asset depletion is built for borrowers whose wealth is in their accounts rather than their paycheck — retirees, near-retirees, business owners between ventures, and anyone asset-rich but income-light. If you could comfortably write a check for years of payments but cannot show a steady salary, this is your program.

The classic candidates:

• Retirees living off savings and investments who no longer draw a W-2 and do not want to force taxable withdrawals just to qualify.
• Business owners who reinvest in their companies and show little personal income but hold large reserves.
• Borrowers between ventures — someone who sold a business or is early in a new one — with substantial liquidity.
• High-net-worth borrowers who simply prefer to qualify on their balance sheet rather than unwinding investments.

Lenders want the assets to be genuinely liquid and seasoned in your accounts, and they will document the source of any large recent deposits. Assets you cannot access without penalty, or that belong to a business rather than you personally, may be limited or excluded.

What down payment and reserves should I expect?

Expect a meaningful down payment — often around 20%, sometimes more — with the reassuring twist that the same assets qualifying you also satisfy the reserve requirement. Because the whole premise is a strong balance sheet, these loans lean on assets rather than income for their safety margin.

General expectations:

• Down payment: commonly a 20% minimum, higher for larger loans or investment property. Remember that funds used for the down payment come out of the pool before your income is calculated, so a larger down payment reduces the assets left to “deplete.”
• Credit score: competitive credit is expected, similar to other alt-doc programs, with stronger scores widening your options.
• Reserves: required, but usually easily met — an asset-depletion borrower by definition has substantial assets. The reserve requirement is carved out of your pool before the income calculation.
• Asset seasoning: lenders typically want to see the assets held for a period (often 60 days or more) so balances are not inflated by a temporary transfer.

These figures are qualification mechanics, not price advertising — this cluster never quotes rates. The structure simply recognizes that a borrower with a deep, liquid balance sheet is a strong borrower even without a paycheck.

What are the tradeoffs?

You gain the ability to qualify on wealth instead of income, and in exchange you accept a larger down payment, non-QM pricing above agency loans, and the reality that the divisor and asset haircuts limit how much income your balance sheet generates. It is a precise tool for a specific profile.

Asset depletion shines when:

• You hold significant liquid assets but little documentable income.
• You want to preserve your investments rather than liquidate them to buy.
• You are retired or between income sources.

Consider alternatives when:

• You have documentable self-employment income — a bank statement loan or 1099 income mortgage may qualify you for more.
• Your income is straightforward — a conventional loan is usually cheaper.
• Most of your wealth is illiquid (real estate, business equity), which asset depletion cannot count.

How the loan gets structured

Structuring an asset-depletion file is largely about optimizing three levers: which assets count and at what percentage, how much you put toward the down payment (since that reduces the depletable pool), and — most importantly — which lender’s divisor and haircut rules produce the most income from your specific balance sheet. A borrower turned down by a lender that divides by 360 months might sail through one that divides by 240.

With access to more than 240 wholesale lenders, the value is knowing exactly which programs treat retirement accounts most generously, which use the shortest divisors, and which season assets fastest. The same statements can support very different loan amounts depending on where the file lands.

The best first step is to walk through your balance sheet together, not to chase a rate. Tell me about your situation and I will show you what your assets can actually support, or start a pre-approval when you are ready. To see how this fits alongside the other programs, return to the alternative documentation loans hub.