How To Get a Mortgage Based on Assets (Even if You Have No Income and/or Are Retired)
Are you retired and trying to refinance or buy a new house?
Or maybe you are NOT retired, but have assets to cover a home purchase, but currently have no income?
What you are looking for is called an Asset Depletion Mortgage or an Asset Based Mortgage
I know from personal experience, that this can be a real pain to find a lender who has this type of mortgage!
But hopefully this article will help you to solve the mystery Asset Based Mortgages. They are easy to obtain if you have substantial assets and can find the right lender.
In this article you’ll find out how to get an mortgage based on assets:
- Asset Based Mortgage Lenders
- How banks calculate your income for Asset Based Mortgages
- 5 Lenders who will do an Asset Based Mortgage or Asset Depletion Mortgage
Some Mortgage Brokers Don’t Know About Asset Depletion or Asset Based Mortgages
With interest rates so low last summer, we wanted to refinance. There was just one big problem. We did not have any W2 income.
I had engineering my exit and became Accidentally Retired and though we have substantial assets, and could pay our entire current mortgage off if we wanted, we could not find an easy way to refinance.
After making several phone calls and having discussions with our current lender and our bank, I was getting nowhere without current income via the traditional lending route.
So I contacted my financial advisor (who has since been fired), who referred me to his recommended mortgage broker. I spoke with the broker and explained my situation. The call went something like this:
“Hi, I am looking at refinancing, but I do not have any current W2 income. We have enough cash that we can pay down our mortgage and are sitting on a lot of assets. Do you have any ideas of what we can do?”
He responded “There’s not much we can do in that situation, but let me check around and see who you could contact.”
He ended up referring me to a Private Bank.
Private Banks will lend via an Asset Based Mortgage, but at a cost.
One way to secure an Asset Based Mortgage, will be to work with a Private Bank. There is a big cost though.
You will need to likely move a large amount of money into that bank.
I spoke with several banks, one of them required a $700K minimum relationship. This could include your mortgage, so if you have a Jumbo Mortgage, this could be a perfect option for you, but we did not need a Jumbo mortgage, so this ended up being a no-go.
The second type of Private Bank, is one that will want to manage your investments. This type of relationship started off in the $2-3M range and required moving all of your assets to them to act as your Financial Advisor and Fiduciary.
I looked closely at those options and had numerous discussions with the bankers, but in the end we did not want to move our money anywhere, but to our own self-directed management, and we did not need a Jumbo Mortgage, so we continued looking.
Contact multiple Mortgage Brokers to find one who works with an Asset Depletion Mortgage Lender
After finding a dead-end with the Private Bankers, I decided to try out online mortgage marketplaces Credible and Bankrate. Credible, denied us immediately and so nothing happened.
Bankrate ended up working out better. They give you the option to connect you to mortgage brokers or other lenders (if you want to), and so I figured I would go ahead and see a competitive offer and try to talk to someone.
My hunch paid off, and I was contacted almost immediately by a mortgage broker who quickly listened to my request and said “you need an Asset Depletion Mortgage – I happen to have done one before, and I know who has them.”
This led us to a quick and speedy refinance.
We were able to apply and and close on the mortgage in 3 weeks. I have to give the credit to this particular Mortgage Broker, who not only knew about the type of mortgage we were looking for, but who also worked quickly as our advocate to get the deal closed.
Portfolio Lenders Will Also Have Mortgages Based on Asssets
I continued to try to find out more about this type of mortgage and who does them, so I called around to all of the local credit unions.
After calling 10 credit unions, I became familiar with the term Portfolio Lender.
A portfolio lender is a bank or lending institution that originates mortgages and holds them in its own portfolio instead of selling them to the secondary market.Bankrate.com
Once I realized portfolio lender was the type of lender I was looking for, it was much faster to find the right type of lender who will be willing to lend to me in the future.
In fact, if you are looking to purchase an investment property with assets, a portfolio lender will be your best friend.
But they will lend on their own terms (especially when calculating income based off of your assets). Sometimes these terms can be more flexible, and other times not, so I recommend calling around.
Make at least 10 calls, minimum.
How Much Assets Do You Need for an Asset Based Mortgage?
It turns out that it completely depends. Freddie Mac and Fannie Mae, have different requirements, as do many of the lenders. It is the wild west out there. But for your reference, here are the Freddie Mac requirements for an Asset Based Mortgage, and the Fannie Mae requirements.
The key requirements are as follows:
- This is a mortgage on your Primary Residence or a second home
- You must have at least 20% in equity in the property
- You must be able to withdraw the assets in their entirety for it to be considered an “Eligible Asset”.
- If you are under retirement age, you will NOT be able to use your 401 k), IRAs, etc.
To do the calculation of what you can afford with your assets:
- You cannot include any funds that will go towards the purchase of the house or refinance in your calculation
- Investment Accounts are sometimes discounted by lenders 70% to allow for fluctuations, bear markets, etc. (but not always – via Freddie Mac or Fannie Mae guidelines not necessary).
- Your “Net Assets” are then divided by by 240 or 360 (lender dependent) ~ The result is your monthly income that will be used towards your Debt to Income Ratio.
That is a lot, so let’s run through a scenario…
Mr. & Mrs. Example Scenario Income Based off Assets Calculation:
- $100,000 in the bank ~ $100,000 eligible
- $1,500,000 in Taxable Investment Assets (not 401 (K), IRA, ETc.) ~ $1,500,000 * 70% = $1,050,000 eligible
- $1,150,000 Total Eligible Assets
- Monthly Income = $1,150,000/ 360 = $3,194.44
So, as you can see Mr. & Mrs. Example have $3,194.44 in monthly income that a typical lender will loan based off of.
Standard DTI is 43%, so with a monthly income of $3,194.44 a typical lender will allow you to have a total of $1,373.61 of debt per month. This will include HOA fees, taxes, and any additional escrow obligations.
So all told, Mr. & Mrs. Example are likely looking at the ability to obtain a mortgage of up to $1,200 a month.
But the asset based income calculation varies from lender to lender, so call around.
3 Ways to Secure a Mortgage in Retirement:
To recap, if you are currently looking for a mortgage in retirement, the three ways to secure one will be:
- Via Standard Lenders (Freddie Mac and Fannie Mae)
- Work with a Private Bank
- Use a Portfolio Lender
And don’t be discouraged if it takes awhile to figure it out. This is not a typical product, and so there are many mortgage brokers, and even loan officers who are not aware of them.
Be sure to mention that you are looking to do an “asset based loan” and if you don’t get anywhere with one lender, try another!
4 Asset Based Mortgage Lenders and Asset Depletion Mortgage Lenders
These are the lenders that I personally discovered do these types of loans via my refinance and investment mortgage pursuit. I am sure there are plenty more:
Let me know of any other Asset Based Mortgage Lenders
Please let me know in the comments if you hear of any other banks doing mortgages based on asssets!
I am sure there are plenty, but thus far, I have only uncovered the above list.
Thanks for reading, and I hope I helped you solve a problem!
Glad I stumbled onto your website! I am 85 (youngish) going strong. Had a similar experience of rejection for no W-2 after spending much time and energy providing documentation.(Dumb mortgage broker couldn’t find a lender to get around the conventional straight jacket – cookie cutter W2 requirements.)
I have a 14 year old 7/1 jumbo ARM that started at $1.5M and is now $930k. Current LTV 40%, 830 FICO, and a $1.8M Fidelity non-IRA portfolio. No missed/late payments.
While I have greatly benefited from the ARM (current rate 2.875%) obviously I know I will be looking at probably 4.25 to 4.75% at reset time nextAugust. I am also reluctant to reduce my nest egg through repayment as my investment income (particularly trading capital gains) is our primary cash flow plus SS.)
Any specific suggestions would be appreciated.
Hey Don. I am not an expert at this by any means. My hunch would be that you’d have a really hard time getting a loan for $930K with $1.8M. At least with the conventional Fannie Mae calculation you’d only be able to borrow $300K with your Non-IRA money. But since you are 85, you’d also be able to use your IRA as well as your Non-IRA, so that would give you more borrowing power.
However, given that you are 14 years into your loan, I would say you might want to look at paying down a portion of your mortgage to speed it up significantly. It may not help if the rate balloons higher and you run into cash flow issues, but at least worth running scenarios.
But depending on your total assets in play, it may be as simple as refinancing and locking in your rate again.
I appreciate your suggestions. I would hope the 40% LTV would be an adequate cushion for a lender as the implied monthly income with the suggested ratios wouldn’t work. Zero real risk but it is what it is.
“You must be able to withdraw the assets in their entirety for it to be considered an “Eligible Asset”.”
It has to be liquid? Majority of our assets are illiquid and sounds like we wouldn’t be able to use them towards calculating monthly income.
What kind of assets are we talking about here?
Mostly CRE syndication and Angel / Private Equity.
Hmm. Based on that, I would say the best bet is to try to work with a Portfolio lender like a WaFd bank to see if they would acknowledge CRE/Private Equity. I’m sure they would toss out Angel completely. But CRE usually cuts dividend checks right? So that could be used as income, and the PE would be entirely based on the risk factors of the fund. I don’t know if a bank would do it, but a Portfolio lender is the best bet based on my limited experience.
This whole “risk” factor banks use to deny folks mortgages with multi million dollar portfolios–simply because they don’t have W-2 income–just doesn’t make sense to me.
Someone can have W2 income and lose their job tomorrow. How are they not more of a risk than someone who, say, has a $3 million brokerage account?
Agree 100%. I would think there is much more risk with many professions (especially when unemployment is high), whereas someone with $3M taking out a $300-500K loan could simply pay it off when/if needed.
This is really great info. As you noted, must folks have no clue about this. Anyway, are rates on these types of mortgages generally higher than conventional loans?
The loan that I was able to secure which was backed by Fannie Mae (I believe) was the same rate as traditional loans.
You will see higher rates with the Portfolio Lenders though, because their loan terms are set by their own parameter. But I would confirm this, as my situation is likely different than yours, so you never know.
Got it, thanks!
I had zero clue that there is actually a way to get a mortgage even without a W-2 income.
I had read somewhere that once you no longer have a W-2 income, you are dead to banks. Which forces me to take that into consideration when I’m deciding to take on this FIRE thing and actually retire early, haha.
I wanted to do a cash out refinance to take advantage of low fixed interest rates, provide liquidity and do an addition to the house. I thought we had very appealing risk profile. The loan was 50% of the home value. We have four times the loan amount in our retirement accounts. The monthly payment is .001 of our net-worth. The problem – we are not 59 1/2 and we have no W-2 income as we are retired early! My wife recently started a second career in real estate and I consult on occasion, so our income is variable. The first mortgage broker said 100k W2 paystub and no retirement assets could get the loan! One can lose a job at any time! Then I “accidentally” found your article and called WaFD Bank! They service their own loans so they can factor in retirement accounts (with a haircut, I think 30%). We closed last week! I have referred several people!
That is fantastic. Thank you for letting me know!
It is pretty crazy that some of the mortgage brokers don’t even know about these and/or perhaps don’t care to share the info?
Wow! Thank you. This is really helpful. I knew that such mortgages exist but I could never find much information on them.
Great to hear!
I have found some solid info out there that I know what to look for, but prior it was like reaching around in the dark.
Anyways glad to be of help!