Asset depletion mortgage guide: turning assets into qualifying income
Written by Jay Beach, SVP, Investor Portfolio Lending · Reviewed by the Mortava lending team · Updated
Borrowers with substantial savings but modest paper income face a frustrating gap: a strong balance sheet doesn’t show up on a W-2. An asset depletion mortgage closes that gap by converting eligible assets into a monthly qualifying income figure. This guide explains how the math typically works, walks through a hypothetical example, covers who the program fits, and compares the main alternatives — including DSCR loans for investment property.
An asset depletion mortgage (also called an asset-based or asset dissipation loan) lets a borrower qualify using liquid assets instead of employment income. The lender totals eligible assets — cash, investments, and often a discounted share of retirement funds — then divides that amount over a set number of months to create monthly qualifying income. Formulas vary by lender, but the approach works well for retirees, high-net-worth borrowers, and business owners with low taxable income.
- An asset depletion mortgage converts eligible liquid assets into a monthly qualifying income figure instead of relying on paystubs or tax returns.
- Most programs divide net eligible assets by a set term — commonly 36 to 120 months for Non-QM programs, or the full loan term for agency-style programs. Formulas vary by lender.
- Cash usually counts at full value, while securities and retirement accounts are often discounted before the calculation runs.
- The program fits retirees, high-net-worth households, and business owners whose tax returns understate their real financial strength.
- Real estate investors can skip personal income documentation entirely with a DSCR loan that qualifies on the property’s rent.
What is an asset depletion mortgage?
An asset depletion mortgage is a home loan that qualifies the borrower based on verified liquid assets rather than employment or business income. You may also see it called an asset-based mortgage, asset dissipation loan, or asset utilization loan — the labels differ, but the mechanics are the same.
Instead of documenting income with paystubs or tax returns, the lender treats your assets as if they were drawn down over a period of time and counts that hypothetical draw as monthly income. In most programs you never actually withdraw or pledge the money — it’s a calculation, not a lien on your brokerage account.
These loans exist in two forms. Agency-style versions follow Fannie Mae and Freddie Mac rules for using assets as qualifying income, which are relatively narrow. Non-QM versions are far more flexible: each lender sets its own eligible-asset list, discount schedule, and draw period. Both paths still require the lender to verify your ability to repay under federal ability-to-repay rules — asset depletion is a documentation method, not a shortcut around underwriting.
How the calculation typically works
Most asset depletion programs follow the same three steps: total your eligible assets, apply discounts by asset type, then divide the net figure by a set number of months to produce monthly qualifying income.
The divisor is where programs differ most, and it matters enormously. Dividing the same portfolio by 60 months produces six times the qualifying income of dividing it by 360. Agency approaches tend to use long windows — Fannie Mae guidance points to the loan’s amortization term, while Freddie Mac’s asset dissipation method uses a 240-month window, per their published guides. Non-QM lenders commonly use much shorter fixed terms.
There is no single industry formula. Every lender publishes its own method, discounts, and overlays — treat the structures below as common patterns to ask about, not guarantees of what any specific lender offers.
| Method | Typical divisor | Where you tend to see it |
|---|---|---|
| Loan-term amortization | Full loan term in months (e.g., 360 on a 30-year loan) | Agency-style programs following Fannie Mae guidance |
| Fixed 240-month draw | 240 months | Freddie Mac asset dissipation approach |
| Short fixed-term draw | Commonly 36 to 120 months | Non-QM asset utilization programs |
| Blended income | Varies by program | Lenders combining an asset draw with pension, Social Security, or part-time income |
Which assets count — and at what value
Cash and cash equivalents usually count at full value, while securities and retirement accounts are typically discounted to account for market risk and access restrictions. Each lender publishes its own schedule, but the pattern below is common across the industry.
One detail that surprises borrowers: funds earmarked for the down payment, closing costs, and required reserves are usually subtracted before the depletion calculation runs. A $1M portfolio doesn’t generate income on the full $1M if $200K of it is going into the purchase.
- Checking, savings, money market, and CDs: typically counted at or near 100% of the verified balance
- Stocks, bonds, mutual funds, and ETFs: often counted at a discount to market value to buffer volatility
- Retirement accounts (IRA, 401(k)): usually discounted further, with extra scrutiny for borrowers under 59½ because of early-withdrawal penalties
- Trust and annuity assets: case-by-case, and the lender generally needs proof you can access the funds
- Commonly excluded or restricted: equity in real estate, unvested RSUs, business operating accounts, and cryptocurrency (treatment varies widely)
A worked example
Here’s how the math plays out for a hypothetical retired borrower. This is an illustrative example, not a quote — every lender’s discounts, divisor, and eligibility rules differ.
Meet a 64-year-old retiree with $250,000 in bank accounts, $900,000 in a taxable brokerage account, and $500,000 in an IRA. Her lender counts bank funds at 100%, brokerage assets at 80%, and retirement funds at 70%, then subtracts $220,000 she’s using for the down payment, closing costs, and reserves.
On this lender’s 84-month program, her net eligible assets of $1.1M produce roughly $13,095 per month in qualifying income — likely enough to support a substantial loan payment alongside her Social Security. The same portfolio on a 120-month program yields about $9,167 per month, and on a 360-month program only about $3,056. The divisor is the single biggest lever in asset depletion lending, which is why comparing program structures matters more than comparing headline marketing.
| Step | Amount |
|---|---|
| Bank accounts counted at 100% | $250,000 |
| Brokerage of $900,000 counted at 80% | $720,000 |
| IRA of $500,000 counted at 70% | $350,000 |
| Gross eligible assets | $1,320,000 |
| Less down payment, closing costs, reserves | −$220,000 |
| Net eligible assets | $1,100,000 |
| Divided by 84 months | ≈ $13,095/month qualifying income |
Who an asset depletion mortgage fits
Asset depletion works best for borrowers whose wealth is real but whose reported income is low, irregular, or nonexistent. If your accountant does a good job minimizing your taxable income, a traditional debt-to-income calculation punishes you for it — this program flips that dynamic.
The common profiles:
- Retirees with large portfolios but little or no employment income
- High-net-worth households living on capital gains, distributions, or irregular windfalls
- Business owners and self-employed borrowers whose tax returns show low AGI after legitimate deductions
- Borrowers after a liquidity event — a business sale, inheritance, or settlement — with cash but no income history
- Borrowers between roles who hold substantial reserves (lender treatment varies)
Pros and limitations
The core advantage is simple: you qualify on what you own, not what you report. The core limitation is just as simple: you need a lot of verified assets for the math to work, and the discounts, reserve deductions, and divisor all shrink the usable number.
Pricing also tends to run above fully documented agency loans, since most asset depletion programs live in the Non-QM world. How much higher depends on the lender, your credit profile, the loan-to-value ratio, and the divisor structure — there’s no universal spread, so compare offers side by side.
| Strength | Trade-off |
|---|---|
| No paystubs, W-2s, or tax returns needed for income | Requires a substantial verified asset base |
| Assets typically stay invested — no withdrawal or pledge in most programs | Discounts and reserve deductions reduce the countable balance |
| Can combine with pensions, Social Security, or other income | Pricing generally runs above fully documented agency loans |
| Useful for larger loan amounts where DTI math fails | Formulas, eligible assets, and divisors vary widely by lender |
Alternatives to asset depletion
If the asset math doesn’t work — or you simply don’t want a lender combing through your portfolio — three other documentation paths solve the same low-paper-income problem.
Bank statement loans qualify self-employed borrowers on 12 to 24 months of business or personal deposits instead of tax returns. P&L-only programs go a step further, underwriting off a CPA-prepared profit and loss statement. Both are built for owners with strong cash flow that tax returns understate — see our complete guide to self-employed mortgages for the full landscape.
For investment property there’s a cleaner answer entirely: a DSCR loan qualifies on the property’s rental income, not yours. No tax returns, no bank statements, no asset-draw formulas — the property’s rent covering the payment is the qualification. If you’re weighing documentation paths for a rental purchase, start with our guide to how DSCR loans work.
| Program | How income is documented | Typical best fit | Property type |
|---|---|---|---|
| Asset depletion | Eligible assets divided over a set term | Retirees and high-net-worth borrowers | Primary, second home, some investment |
| Bank statement loan | 12–24 months of deposit history | Self-employed with strong cash flow | Primary, second home, some investment |
| P&L-only loan | CPA-prepared profit and loss statement | Established business owners | Primary, second home, some investment |
| DSCR loan | Property rent vs. the loan payment — no personal income | Real estate investors | Investment property only |
How to move forward
Start by getting your asset picture organized before you talk to any lender: recent statements for every account, a note on which funds are earmarked for the purchase, and clarity on any access restrictions (retirement penalties, trust terms, vesting schedules).
Then compare at least two or three programs on the variables that actually move the number — the divisor, the discount schedule by asset type, and how the lender treats retirement funds at your age. Because formulas vary so much, the same portfolio can produce very different qualifying income from one lender to the next.
And if the property you’re financing is a rental, run the DSCR math first. Qualifying on the property’s rent is usually faster and simpler than qualifying on a depletion formula — you can pressure-test a deal in minutes with a DSCR calculator, or read up on qualifying without tax returns across all program types.
Where Mortava fits
Mortava is a direct lender for business-purpose loans to real estate investors, so we don’t originate consumer asset-depletion mortgages ourselves. If you’re financing a primary residence or second home, we’ll connect you with a Mortava partner who handles consumer programs.
If the property is an investment, there’s a simpler path than any depletion formula: a DSCR rental loan qualifies on the property’s rent instead of your personal income — no tax returns and no income documentation at all. Mortava’s DSCR program covers 1–4 unit rentals with up to 85% LTV on purchases, loan amounts from $100K to $3.5M, 30- and 40-year fixed and interest-only options, and the ability to close in an LLC or corporation.
Quotes use a soft credit inquiry — no hard pull — and you can request an indicative term sheet reviewed by Vesty, our AI review system, with manual approval after submission. Get a term sheet to see where an investment property deal stands.
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Frequently asked questions
Editorial content. Mortava is a direct lender for business-purpose loans to real estate investors; where Mortava programs appear in a comparison, that inclusion is disclosed. Programs, rates, and guidelines change without notice, nothing here is a commitment to lend, and any terms shown are subject to underwriting review.