Asset Depletion Loans

Asset Depletion Loans

Asset Depletion Loans

Asset depletion loans, also known as asset-based mortgages or asset utilization loans, offer a unique lending avenue primarily suited for borrowers with substantial assets but lower traditional income. This kind of loan is particularly beneficial to retirees, individuals with irregular income streams (like self-employed individuals or freelancers), and people with substantial investments.

How It Works

In the traditional loan approval process, lenders primarily consider the borrower’s income, credit score, and employment status. However, asset depletion loans shift the focus from income to assets. The lender considers a borrower’s assets, such as savings, retirement accounts, and investment portfolios, to determine if they can afford the loan payments.

To calculate loan eligibility, lenders typically use a specific formula. While these formulas can vary, a common method involves taking the total of the borrower’s assets and subtracting any down payment and closing costs. This amount is then amortized over a specified term (e.g., 15 or 30 years), or until the borrower turns a certain age (often 70 or 85). The resulting figure is considered the borrower’s income for the purpose of the loan.


Asset depletion loans are designed to be flexible and take into account a more holistic view of an individual’s financial situation. Here are some key benefits:

  1. Access to Financing: Asset depletion loans can provide financing options to borrowers who might not qualify for traditional loans due to lack of regular income.
  2. No Draw on Assets Required: The borrower is not required to draw down or liquidate assets to repay the loan. Instead, the loan is based on the assumption that if necessary, the borrower could draw on their assets for repayment.
  3. Broad Asset Types: Lenders generally accept a wide variety of assets, including savings accounts, retirement accounts, investment portfolios, real estate, and even expected inheritances.
  4. Potentially Larger Loans: Since the loan size is based on the total assets, borrowers may be eligible for larger loan amounts compared to income-based loans.


While asset depletion loans can be beneficial, they also have some considerations to bear in mind:

  1. Higher Interest Rates: These loans often carry higher interest rates than traditional mortgages due to the perceived higher risk associated with them.
  2. Varied Lender Policies: Lenders have different policies and formulas for calculating the loan amount, so terms can vary significantly.
  3. Required Documentation: Borrowers typically need to provide comprehensive documentation of all their assets, which can be time-consuming and potentially invasive.

In summary, asset depletion loans can be a beneficial lending solution for individuals with significant assets but lower or irregular income. It’s essential to understand the specifics of this loan type and seek professional advice to determine if it aligns with your financial situation and goals.

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Licensed by the Pennsylvania Department of Banking, NMLS #143821

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CM Mortgage Services Inc.
1240 West Chester Pike
West Chester, PA 19382

(610) 430-6852