Asset-Depletion Loans: Qualifying on Net Worth, Not Income

Asset-depletion loans solve a specific problem: the borrower has plenty of money but not enough reported income. A retiree with $8M in a brokerage account pulling $200K of dividends would be DTI-qualified. A retiree with the same $8M in a 401(k) not yet in RMD phase, with no earned income, wouldn’t be, on a standard income basis.

Asset-depletion underwriting flips the calculation. It divides qualifying assets by the loan term (usually 360 months for 30-year loans) and treats the result as monthly “income.” An $8M asset base divided by 360 months is $22,222 of monthly qualifying income, which supports a substantial mortgage.

The product isn’t new, it’s been offered by private banks and specialty lenders for years, but it’s increasingly relevant to tech retirees, founders in between exits, and senior ICs with heavy equity that hasn’t yet been sold.

How the calculation works

Each lender has its own formula, but most follow a similar framework:

1. Start with eligible liquid assets
2. Subtract amounts used for down payment and closing costs
3. Subtract required post-closing reserves (usually 6 months PITI)
4. Apply a discount factor to the remaining assets (typically 70-100%)
5. Divide by the loan term in months

Example: Retiree has $5M in a taxable brokerage account. Plans to use $600K for down payment and $50K for closing on a $3M home. Keeps $200K in reserves. Remaining: $4.15M.

• Liquid remaining: $4,150,000
• Discount at 85%: $3,527,500
• Divided by 360 months: $9,799 monthly qualifying income

At 43% DTI, this borrower can support $4,213 of monthly PITI, which covers a loan of roughly $550K at current jumbo rates. That’s not enough for the $2.4M loan they need.

For larger loans, the asset base needs to be much larger, or the program needs to combine asset depletion with other income (Social Security, dividends, pension).

What counts as eligible assets

Most asset-depletion programs accept:

• Taxable brokerage accounts (stocks, bonds, mutual funds, ETFs): typically at 70-100%
• Bank and money market accounts: 100%
• IRA and 401(k) accounts: typically at 60-70% (haircut for early-withdrawal penalty and taxes)
• Cash value of life insurance: 100% of surrender value

Excluded from asset-depletion calculations:

• Unvested RSUs, unexercised options
• Cryptocurrency (some programs accept 50%, most exclude)
• Real estate (unless sold and proceeds in cash)
• Private business interests
• Retirement accounts already in RMD phase (these provide direct income instead)

The discount factors

Why does the lender apply 70-85% instead of 100%? Two reasons:

1. Market risk. Over a 30-year loan, a stock portfolio could drop 40%+ in a bear market. The discount buffers against that.
2. Tax drag. Withdrawing from retirement accounts triggers ordinary income tax, reducing effective spendable assets.

For retirement accounts (IRA, 401(k)), the discount is steeper, often 60-70%, because distributions are taxed at the borrower’s marginal rate.

Some private-bank programs offer 100% of liquid investable assets for top-tier clients with $10M+ portfolios.

Where asset-depletion fits

Primary use cases:

Retiree with all liquid in 401(k) and IRA. No W-2, no pension yet, Social Security deferred. Standard qualification fails. Asset depletion works.

Founder post-exit with proceeds in cash. No job, no income history for the last 6-12 months. Recent sale generated $15M of cash. Asset depletion qualifies on the cash.

Pre-IPO senior IC with limited liquid assets but large vested stock. Some portfolio lenders count vested public stock at 70-85%. Pre-IPO stock usually excluded or heavily haircut.

Tech family with concentrated stock and low base salary. Qualifies on asset base even when base salary alone is insufficient for a jumbo loan.

Combining with traditional income

Most borrowers don’t need pure asset-depletion, they have some income. Lenders typically allow combined qualification:

• Asset-depletion calculation provides “base” income
• Actual W-2, 1099, pension, and Social Security stack on top
• Combined income is used for DTI

This combination approach gets many borrowers over the qualification line who wouldn’t qualify on either income or assets alone.

Rates and lender availability

Asset-depletion programs are offered by:

• Private banks (Schwab, Morgan Stanley, UBS, Goldman, JPM Private Bank)
• Portfolio lenders (First Republic successor, certain credit unions)
• Non-QM specialty lenders (Angel Oak, Athas, various correspondent lenders)

Rates:

• Private bank programs: often within 25-50 bps of standard jumbo
• Non-QM programs: 50-150 bps higher than standard jumbo

Private-bank programs require an existing relationship (usually $1M+ in managed assets). Non-QM programs are more open but pricier.

The reserve requirement

Asset-depletion loans typically require 12-24 months of PITI in reserves after closing. Reserves can come from the same asset base you’re depleting, but are excluded from the depletion calculation.

Example: $5M total liquid. Reserves required: $180K (12 months PITI). Down payment: $600K. Closing: $50K. Amount available for depletion calculation: $5M - $180K - $600K - $50K = $4.17M.

Documentation burden

Asset-depletion loans require extensive documentation:

• 60-90 days of statements for every asset account
• Current value statements dated within 10 days of underwriting
• Letter of explanation for any large deposits or withdrawals
• Verification that accounts are in borrower’s name
• Trust documentation if assets are held in trust
• Tax returns for the last 2 years (to corroborate asset history)

The application-to-close timeline is typically 45-60 days, longer than standard jumbo.

Frequently asked

Does asset depletion avoid the 2-year income rule? Yes, for the asset portion. If the borrower has supplemental W-2 or contract income, the 2-year rule applies to that portion only.

Can I use an HSA in asset-depletion calculation? Most lenders exclude HSA from asset calculations because the money is earmarked for medical spending. Some include it at a heavy haircut.

What happens at refinance if assets have declined? Refinance requires re-qualification. If the asset base dropped 30%, the new qualification may not support the existing loan. Borrowers should maintain 20-30% buffer above minimum qualifying assets to withstand market volatility.

Does the §6501 statute of limitations apply to tax return requests? Lenders can request returns regardless of IRS statute, they’re looking for underwriting evidence, not tax audit material. Usually the last 2 years of returns.

How does trailing nexus affect the asset base? Not directly, but if the borrower faces a large California state tax bill from trailing-nexus RSU income, that liability reduces effective net worth. Lenders sometimes ask for state tax liability statements as part of underwriting.