Asset Depletion Mortgage Guide: How the Calculation Actually Works (and Where Lenders Differ)

What is an asset depletion mortgage?

Some borrowers are wealthy on paper but look like they don’t qualify for a mortgage on their tax returns. Retirees, business owners who pay themselves modestly, real estate investors with strong balance sheets but minimal W-2 income — the wealth is real, the documented income isn’t.

Asset depletion mortgages solve that problem.

Also called an asset dissipation loan, asset utilization loan, or asset-based mortgage, an asset depletion mortgage qualifies you for a home loan using your liquid assets instead of your income. The lender takes your eligible assets, applies haircuts to certain account types, and divides the result by a “depletion period” to calculate a notional monthly qualifying income. That number replaces tax returns, W-2s, or bank-statement income in the underwrite.

You’re not liquidating anything. The assets stay invested. The calculation is just a method for translating your balance sheet into a qualifying income figure the lender can use.

Quick reference — Defy asset depletion program

If you’d rather just see if you qualify, our team gives a 5-minute deal-fit review on your actual portfolio — actual qualifying income on your actual assets, not “starting at” pricing.

Who this guide is for

• Retirees with significant liquid wealth but limited Social Security / pension income
• Business owners and self-employed borrowers who manage taxable income aggressively
• Real estate investors with strong balance sheets but minimal W-2 income
• High-net-worth individuals whose tax strategy doesn’t support traditional qualification
• Borrowers who recently exited a business and don’t have current employment

If you’re a W-2 borrower with strong documented income and a conforming loan amount, asset depletion isn’t your product — conventional will price better. Asset depletion is built for wealth without paycheck.

The math, walked through

The single most important thing to understand about asset depletion is the formula — because it’s where lenders differ materially, and where most of the qualifying income difference between providers comes from.

The formula

(Eligible Assets − Down Payment − Closing Costs − Reserves) ÷ Depletion Period = Monthly Qualifying Income

Four inputs. Two of them are mechanical (down payment, closing costs). One is the lender’s reserve requirement. One — the depletion period — is the variable that changes your qualifying income by 6x or more.

Step 1: Eligible assets, with haircuts

Not every dollar in your accounts counts equally. Lenders discount certain account types to reflect volatility, withdrawal restrictions, and liquidity risk. Typical haircut schedule:

For example, a borrower with $500K in cash, $1M in a taxable brokerage account, and $800K in an IRA (at age 62) would have eligible assets of:

• Cash: $500K × 100% = $500K
• Brokerage: $1,000K × 80% = $800K
• IRA: $800K × 70% = $560K
• Total eligible: $1,860K

Step 2: Subtract transaction costs and reserves

Eligible assets get reduced by what you need to actually do the deal:

• Down payment on the property
• Closing costs (typically 2–4% of loan amount)
• Reserves required by the lender (usually 6–12 months of PITIA)

Using the same example, on a $1M home purchase with 20% down:

• Eligible assets: $1,860K
• Down payment: $200K
• Closing costs (~3%): $24K
• Reserves (12 months PITIA, assume ~$5K/mo): $60K
• Net depletable: $1,576K

Step 3: Divide by the depletion period

This is where everything changes.

Same borrower, same assets, six different qualifying income figures depending on which lender’s depletion period applies. The 60-month period generates 6x more qualifying income than the 360-month agency calculation — which is the difference between qualifying for a $1.5M home and qualifying for a $400K home on the exact same balance sheet.

Defy’s program uses a 60-month depletion period. Most competitors use 84, 120, or longer. The math anchor matters more than the rate.

How agency (Fannie/Freddie) asset depletion differs

A common source of confusion: Fannie Mae and Freddie Mac both have agency-conforming asset depletion calculation methods, but they’re structured very differently from Non-QM asset depletion programs.

Fannie Mae’s “Employment-Related Assets” calculation:

• Available for retirement-aged borrowers (typically 59½+)
• Depletion period is typically the loan term — usually 30 years (360 months)
• Asset haircuts more conservative than Non-QM (retirement accounts often 70% capped further)
• Layered with traditional DTI requirements
• Result: meaningful qualifying income, but materially lower than Non-QM asset depletion

Freddie Mac’s “Asset & Income Modeler” approach:

• Similar conservative depletion math
• Designed to supplement other income sources, not replace them entirely
• Best for borrowers with some documented income who need a balance-sheet boost

Non-QM asset depletion (Non-QM specialty lenders):

• 60–120 month depletion period
• No employment income required at all
• Can be sole qualification method
• Higher LTV ceilings (up to 80% vs. 70% on some agency programs)
• Higher rate tier than agency (50–150 bps premium)

Decision logic: If you have some documented income and need a balance-sheet boost to qualify, Fannie/Freddie’s methods may work and price better. If you have no documented income and need pure asset-based qualification, Non-QM asset depletion is the answer — and the depletion period your lender uses determines whether the deal works.

Eligible vs. ineligible assets — common confusion

Eligible assets (after haircuts)

• Checking and savings accounts
• Money market accounts and CDs
• Brokerage accounts (taxable): stocks, bonds, mutual funds, ETFs
• Retirement accounts: 401(k), IRA, 403(b), SEP IRA, Roth IRA
• Trust accounts (with proper documentation of borrower’s beneficial interest)
• Annuity cash surrender value

Not eligible

• Real estate equity (the property itself, or other real estate holdings)
• Business equity or business assets
• Cryptocurrency holdings (most lenders; some Non-QM programs now consider with haircuts — confirm)
• Vehicles, art, jewelry, collectibles
• Restricted stock (vested only counts, with haircuts)
• 529 plans, HSAs (designated for specific use)
• Pension benefits not yet distributed

The biggest source of borrower frustration is real estate equity: it’s wealth, but it’s not eligible because asset depletion is built on liquid qualifying income, and real estate can’t be deployed monthly. For real estate equity, cash-out refinance or DSCR loans are the right products.

Asset depletion mortgage calculator — what online calculators get wrong

Most online “asset depletion mortgage calculators” produce numbers that won’t match what an actual lender approves. Three reasons:

• They use a generic depletion period — usually 360 months (agency style) or 120 months (mid-range Non-QM). Your actual qualifying income depends on the specific lender’s depletion period, which varies from 60 to 360.
• They miss the haircut logic. A calculator that takes your retirement account balance at 100% is overstating eligible assets by 30–50%. The lender will discount.
• They don’t subtract reserves, down payment, and closing costs. Your eligible assets feed the calculation, but the net depletable figure after those deductions is what actually gets divided by the depletion period.

The right way to estimate qualifying income on your own portfolio:

1. List each liquid account with current balance
2. Apply haircuts: 100% cash, 80% brokerage, 70%/50% retirement based on age
3. Sum the haircut totals = eligible assets
4. Subtract estimated down payment + 3% closing costs + 6–12 months reserves
5. Divide by the depletion period of the lender you’re considering

That gives you a realistic estimate. For a precise quote on a specific scenario, our team gives a 5-minute deal-fit review using actual program parameters.

Asset depletion vs. bank statement loan

A common borrower question, especially among self-employed and semi-retired borrowers who could plausibly use either product. The decision comes down to where the money sits and what the documentation looks like.

Decision logic: if you have current cash flow but the tax returns don’t reflect it, bank statement is the right product (qualifies on cash flow). If you have no current income but significant liquid wealth, asset depletion is the right product (qualifies on balance sheet). If you have both, ask which produces better qualifying income on your specific scenario — sometimes the answer surprises borrowers.

Can retirees qualify for a mortgage with assets instead of income?

Yes — this is one of the most common use cases for asset depletion. Retirees often have:

• Significant balances in IRAs, 401(k)s, and taxable brokerage accounts
• Limited Social Security and pension income (often modest relative to the assets)
• No employment income at all
• A tax-return picture that understates the wealth picture significantly

Conventional underwriting reads the Social Security and pension as the income, calculates DTI against that, and routinely declines retirees for mortgage amounts their wealth easily supports. Asset depletion fixes that.

A retiree with $2M in liquid investable assets and $40K/year in combined Social Security and pension can typically support a mortgage in the $750K–$1M+ range using asset depletion — depending on the lender’s depletion period. Same retiree quoted on Social Security and pension alone might cap out at $250K conventionally.

For retirees: the question isn’t whether the math works. It usually does. The question is which lender’s depletion period produces the qualifying income you need.

When asset depletion is the right product (and when it isn’t)

Strong fit

• You’re retired with significant liquid wealth and limited pension/Social Security income. Classic use case. Asset depletion takes balance-sheet wealth and converts it to qualification.
• You exited a business recently and don’t have current employment income but have proceeds in liquid accounts. Asset depletion gives you 6–18 months of qualification runway while you figure out the next move.
• You manage taxable income aggressively for tax reasons. Doctors, dentists, attorneys, business owners who pay themselves modestly to reinvest in the practice. Tax returns understate the wealth picture; asset depletion corrects for that.
• You’re a high-net-worth foreign national with US assets but no US tax history or US employment. Asset depletion can stand alone or layer with foreign national programs.

Weaker fit

• You have strong W-2 or self-employed income that documents cleanly. Conventional, bank statement, or P&L will likely price better and produce equivalent qualifying income.
• Your wealth is in real estate equity, not liquid accounts. Real estate doesn’t count toward asset depletion. Look at cash-out refinance instead.
• You need maximum LTV (90%+). Asset depletion caps at 80% LTV at most lenders. If you need higher leverage, bank statement (90% LTV) or conventional may serve better.
• You have substantial business equity but limited personal liquid assets. Business equity isn’t eligible. The product math doesn’t work.

What you’ll need at application

• Two months of statements on every account you want to use for qualification. The most recent two months, current at the time of underwriting.
• Account ownership documentation — name on each account must match the borrower (or be jointly owned with a co-applicant on the loan).
• Trust documentation if assets are held in trust — beneficial interest, distribution authority, trustee documentation.
• Retirement account age confirmation for IRA / 401(k) holdings — eligibility percentage changes at 59½.
• Asset seasoning: assets typically need to be in the account for 60+ days to count. Recent large deposits get questioned.
• Source-of-funds documentation if any account had significant recent activity (large deposits, transfers between accounts, business distributions).

The single most common source of underwriting delay on asset depletion files: missing the second month of statements on one or more accounts. Pull all account statements current at application — not three weeks out of date.

The Defy asset depletion program — full specs

• Depletion period: 60 months (industry standard ranges from 84 to 360)
• Minimum FICO: 680
• Max LTV: 80%
• Loan amounts: No hard floor; up to $6M
• Property types: Primary, second home, investment
• LLC vesting: Allowed on investment property
• Closing speed: 14–21 business days typical
• Rate tier: Non-QM rate band; typically 50–150 bps above conventional, varies by FICO and LTV
• Reserves: 6–12 months PITIA depending on loan size and credit profile

For current pricing on your specific scenario, contact our team.

How asset depletion compares to alternatives

For the same borrower profile, the realistic options are usually:

Asset depletion is the answer when there’s no current income to document. Bank statement and P&L assume the borrower has self-employment cash flow showing up somewhere. Conventional assumes a clean W-2 or tax-return income story. Pick the product that matches what you actually have — not what you wish you had.

Common questions

What’s the difference between asset depletion and asset dissipation?
Same product, different name. “Asset depletion” is the more common term industry-wide. “Asset dissipation” is used by some lenders (NASB notably) for the same calculation methodology. Both describe a loan that qualifies on liquid assets via a depletion period calculation.

Do I have to actually liquidate my assets?
No. The depletion is notional — a mathematical method to translate your assets into qualifying income. The assets remain in your accounts, invested, and continue to grow (or fluctuate) normally. You’re not required to sell, withdraw, or move anything.

What asset depletion period does Fannie Mae use?
Fannie Mae’s Employment-Related Assets approach typically uses the loan term (usually 360 months on a 30-year mortgage). That’s why agency asset depletion produces materially lower qualifying income than Non-QM asset depletion — the same assets divided by 6x more months.

Can I combine asset depletion with other income sources?
Yes. Asset depletion income can be added to other documented income (Social Security, pension, part-time employment, bank-statement self-employment income). The combined number determines DTI. This is the most common use case for retirees with modest pension/SS plus significant liquid wealth.

Is there a minimum asset amount required?
No hard floor — the requirement scales with the loan amount and the depletion period. As a rough rule: divide the loan amount by 60 months to get the monthly payment you need to support, then multiply by your DTI to find the qualifying income required, then multiply that by the depletion period to back into the eligible assets you need. A $1M loan typically needs $1.5M+ in eligible assets at a 60-month depletion period; the same loan needs $9M+ at a 360-month agency depletion period.

Are asset depletion rates higher than conventional?
Yes, modestly. Asset depletion sits in the Non-QM rate band — typically 50-150 bps above conventional 30-year fixed. As of mid-May 2026, conventional 30-year fixed is at 6.36% per Freddie Mac PMMS; asset depletion typically prices in the high 6s to mid 7s depending on FICO and LTV.

Will asset depletion affect my credit?
Single hard inquiry, no different from any other mortgage. The underwrite reviews your asset statements but doesn’t pull anything from your investment accounts.

Where to go next

• Run your scenario: Talk to a Defy advisor — 5 minutes, actual qualifying income on your actual assets
• Detailed requirements: Asset Depletion Mortgage Requirements
• For real estate equity (not eligible for asset depletion): Cash-Out Refinance Complete Guide
• For self-employed income: Bank Statement Loans
• For investment property: DSCR Loans
• Compare Non-QM lenders: Top Non-QM Mortgage Lenders 2026 · Best DSCR Lenders

If you’ve been told you don’t qualify for a mortgage because your income doesn’t support the loan amount — but your balance sheet clearly does — asset depletion is probably the product. Call us. Five minutes will tell you whether the math works on your actual assets.

About the author: Todd Orlando is Co-Founder and CEO of Defy Mortgage. Twenty-five years in Non-QM and wealth-based lending, with prior experience at First Republic and Morgan Stanley. Defy is a direct Non-QM lender specializing in asset depletion, DSCR, bank statement, P&L, and foreign national programs for retirees, self-employed borrowers, real estate investors, and high-net-worth individuals.