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Asset Depletion Equation:
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Asset Depletion is a mortgage qualification method that allows borrowers to use their liquid assets to qualify for a loan. Instead of traditional income verification, lenders calculate a monthly income stream based on the borrower's available assets.
The calculator uses the Asset Depletion equation:
Where:
Explanation: This calculation determines the monthly income that can be generated from your remaining assets after the down payment, spread over the loan term.
Details: Asset depletion calculations are crucial for self-employed individuals, retirees, or those with significant assets but irregular income streams. It provides an alternative path to mortgage qualification.
Tips: Enter your total liquid assets in dollars, the down payment amount you plan to make, and the loan term in months. Ensure assets are greater than or equal to the down payment.
Q1: What types of assets qualify for asset depletion?
A: Typically, liquid assets such as cash, stocks, bonds, mutual funds, and retirement accounts. Real estate and business assets usually don't qualify.
Q2: How do lenders view asset depletion income?
A: Lenders typically use a conservative approach, often dividing assets by a longer period (e.g., 60-84 months) rather than the actual loan term.
Q3: What is the minimum asset requirement?
A: Requirements vary by lender, but typically you need significant assets - often 6-12 months of mortgage payments in reserve after the down payment.
Q4: Can asset depletion be combined with other income?
A: Yes, many lenders allow you to combine asset depletion income with other verified income sources to qualify for a larger loan.
Q5: Are there any limitations to asset depletion mortgages?
A: These loans may have higher interest rates, stricter reserve requirements, and may not be available for all property types or loan amounts.