The Asset Depletion Loan Program has a lot of benefits for homeowners who might not have regular income or employment but do have other assets such as a retirement fund or other property investments. If you’re looking to qualify for a great rate, keep reading to see if this loan program can benefit you.
How it Works
Here’s a scenario for you: A couple, newly retired, decide to buy their “forever” home. They begin searching and after a few weeks found the perfect place for them to live. They want to finance the purchase so they talk to their bank where they’ve had their accounts for years. The loan officer there is very pleasant and as they get to the nuts and bolts of the application they talk about their income.
Since they’re newly retired, the only monthly income they receive is from Social Security. The rest of their income will come from their sizable savings accounts. But there’s a problem. Their monthly income from social security isn’t enough to qualify them. They have just over $1 million in checking, savings and a retirement fund but it’s not income, it’s savings. The bank says they can’t qualify because their only verifiable income isn’t enough to qualify them for the home they want to buy.
This story doesn’t really make sense, does it? A couple that has a significant amount of money saved up but it doesn’t count for anything. They have a million dollars in the bank but get turned down for a $300,000 mortgage.
But we understand this situation. It’s plain common sense to approve someone for a mortgage if they have so much cash available to them but don’t show any regular monthly income. Most mortgage programs today require lenders to verify a borrower’s ability to repay the mortgage and the main component of that calculation is to document gross monthly income.
Who is Eligible
We have a program for just this situation called the Asset Depletion Loan. This mortgage is designed for high net worth individuals who may not be able to show enough income on their tax returns to qualify them for a mortgage but could easily pay cash for the property several times over. With this program, a borrower’s assets are amortized over a period of time to arrive at a monthly income figure.
The asset depletion loan can be used in conjunction with other income such as social security or pension payments and can be used by anyone, not just reserved for retirees. If a borrower is younger than 59.5 years, retirement accounts can be used at 50% of their current value but if older than 59.5, 100% can be used. This is actually a new guideline. The program can be used to finance a primary residence, second home or investment property with loan-to-values up to 75% of the purchase price.
How to Decide
This is the perfect financing solution for high net worth individuals who rely on their retirement funds and cash on hand to take care of monthly obligations. Most banks would turn down a loan application under this scenario which leaves many potential borrowers scratching their heads wondering how they can have so much money in the bank but can’t get approved for a simple mortgage. I understand this situation and have the solution. Let’s talk.