ASSET DEPLETION LOAN

Key Features of Asset Depletion Loans:

Qualification Based on Assets:

With asset depletion loans, lenders consider the borrower’s liquid assets as the primary source of repayment for the mortgage loan. Instead of relying solely on income from employment or other sources, the borrower’s assets are used to determine their ability to repay the loan.

Asset Depletion Calculation:

Lenders calculate the borrower’s monthly income by dividing their total liquid assets by the loan term (typically 360 months or the loan’s maturity date). This calculated monthly income is then used to determine the borrower’s debt-to-income ratio (DTI) for mortgage qualification purposes.

Flexibility for Borrowers:

Asset depletion loans offer flexibility for borrowers who may have significant assets but limited or irregular income, such as retirees, investors, or individuals with substantial savings or investments but minimal traditional income sources.

Asset Documentation:

Borrowers are required to provide documentation verifying their liquid assets, including bank statements, investment account statements, retirement account statements, and any other relevant financial documents. Lenders may also require proof of ownership and valuation for non-liquid assets, such as real estate or business interests.

Loan Terms and Conditions:

Asset depletion loans typically come with terms and conditions similar to traditional mortgage loans, including interest rates, loan amounts, repayment terms, and eligibility criteria. Borrowers should review and understand the terms of the loan agreement before proceeding with an asset depletion mortgage.