An asset depletion loan — sometimes called asset utilization or asset-based qualifying — turns your liquid assets into a monthly income figure by dividing them across a set term. It exists for borrowers who plainly have the means to repay but whose tax returns do not show it: retirees, early exits, and anyone living on invested capital.
How Asset Depletion Works
The lender takes your qualifying liquid assets, applies any discount required for the asset type, and divides the result across a defined number of months. That monthly figure becomes your qualifying income for underwriting purposes.
Nothing is actually liquidated. You are not required to draw the assets down, and the accounts remain yours. The calculation is a method of demonstrating capacity, not a withdrawal schedule.
The plain logic: A borrower holding substantial liquid capital can obviously service a mortgage. Conventional underwriting has no mechanism to recognise that unless the assets generate reportable income. Asset depletion supplies the mechanism.
The Calculation
Programs differ on two variables, and both materially change your qualifying figure:
- The discount applied to each asset class. Cash and money market funds are typically counted at or near full value. Retirement accounts and market-exposed investments are usually discounted, reflecting volatility, access restrictions, and potential tax on withdrawal.
- The amortisation term. The number of months the assets are divided across. A shorter term produces a higher monthly income figure; a longer one produces a lower figure but may apply broader eligibility.
Because those two variables drive everything, the same asset base can produce quite different qualifying income at different lenders. It is worth comparing before assuming a figure.
Which Assets Count
| Asset type | Typical treatment |
|---|---|
| Checking and savings | Generally counted at or near full value |
| Money market and CDs | Generally counted at or near full value |
| Brokerage and mutual funds | Usually discounted for market exposure |
| Retirement accounts (401k, IRA) | Usually discounted; access and age restrictions considered |
| Trust assets | Case by case; depends on access and control |
| Real estate equity | Generally excluded — not liquid |
| Business operating accounts | Frequently excluded or heavily restricted |
| Crypto holdings | Varies significantly by lender; often excluded or discounted heavily |
Assets must generally be seasoned, accessible, and unencumbered. Funds pledged as collateral elsewhere, or recently deposited without a documented source, are typically excluded.
Who They Fit
- Retirees with substantial savings and limited reportable income
- Borrowers who recently exited a business and are between income sources
- High-net-worth individuals whose income arrives irregularly
- Borrowers living on investment capital rather than distributions
- Anyone with a strong balance sheet and a weak income statement
What You Need
- Recent statements for every account being used to qualify, all pages
- Documentation that the assets are seasoned and unencumbered
- Source-of-funds evidence for any large recent deposits
- Credit report authorization
- Proof that down payment and closing funds are separate from the assets used to qualify
- Standard property file — contract, appraisal, insurance, and title
Things Borrowers Get Wrong
- Counting the same dollars twice. Funds used for down payment and closing costs generally cannot also serve as qualifying assets. Model them separately.
- Assuming full value on retirement accounts. Discounts on restricted or market-exposed assets are standard, not negotiable outliers.
- Moving money right before applying. Recent large transfers require documentation, and unseasoned funds may be excluded entirely.
- Overlooking that this can be combined. Asset depletion is often layered with other qualifying income rather than used alone.
- Including real estate equity. It is not liquid, and it does not count.
Program parameters differ between lenders and change with market conditions. The figures here describe what is typical across the Non-QM market — your actual terms depend on your scenario, so submit your deal for real numbers.
