Asset Depletion Mortgages: How Do They Work (2023)

In the world of real estate, mortgages have been around since ancient times. Within that time, they have evolved and adapted to different financial climates – including asset depletion mortgages. Asset Depletion Mortgages are a unique kind of mortgage that uses one’s assets other than their home as collateral to secure a loan from a lender. This type of loan can be immensely beneficial for people who want or need access to money but who may not qualify for traditional loans due to income or credit limitations. In this blog post, we will answer the question: What is an Asset Depletion Mortgage? And explain how it works in 2021 so you can make the best decision for your financial future!

What Is an Asset Depletion Mortgage? How Does It Work?

An asset depletion mortgage allows borrowers with substantial assets but little income—like retirees and self-employed individuals—to secure a loan. To be eligible, the lender will consider an individual’s investments, bank accounts, retirement funds, and other resources to calculate a notional income based on their value and rate of return over the remaining duration of the loan. This type of mortgage is ideal for those seeking funding without relying solely on regular revenue sources.

To determine if the borrower can afford their mortgage payments, the lender will take into account any other sources of income, such as Social Security benefits or rental income. Once all this has been calculated, they’ll look at your notional income and decide whether you can pay off your loan. If everything adds up to a suitable amount, then it’s likely that you’ll be approved for the mortgage – but if it doesn’t add up correctly, then there are some alternative options available, like finding someone with good credit to co-sign on a loan or opting for a smaller mortgage that fits within your budget better.

It is essential to be mindful that asset depletion mortgages may include higher interest rates or extra costs since they are a greater risk for the lender. Before concluding whether it’s suitable for their financial circumstance, borrowers should meticulously assess the expenses and potential risks of this type of loan.

Pros and Cons of Asset Depletion Mortgages

Deciding whether to go with an asset depletion mortgage can be a tricky decision. Before committing, it’s important to understand the potential benefits and drawbacks that come along with this type of loan product. Here are some key points for you to evaluate before making your choice:


  1. Qualification: Asset depletion mortgages are an excellent opportunity for borrowers to qualify for a larger loan than their income would normally allow.
  2. Flexibility: This mortgage can be the perfect fit for those with a lack of regular income, such as retirees and self-employed individuals who possess significant assets. It allows them to leverage their existing resources while taking advantage of favorable borrowing conditions.
  3. No employment verification: For those without steady employment or who are self-employed, an asset depletion mortgage provides a simpler application process by eliminating the need to prove income.


  1. Higher interest rates: As asset depletion mortgages carry more risk for the lender, they can come with higher interest rates or extra fees than traditional mortgages.
  2. Limited availability: Although not all loan providers offer asset depletion mortgages, those who do have certain standards for qualification.
  3. Asset depletion risk: If the borrower’s resources don’t produce the projected income, it could be impossible for them to make payments on their mortgage, creating a potential situation of defaulting or even foreclosure.
  4. Asset depletion impact: Relying on assets to qualify for a mortgage could have serious repercussions in the future, especially if those same assets will be needed as an income source later in life.


All in all, asset depletion mortgages are an exciting and powerful tool for home buyers to access funds now and have the potential to revolutionize the way people manage their assets during retirement. While asset depletion mortgages may not be the right choice for everyone, they offer could offer a great deal of financial flexibility and freedom to those who take advantage of them. It is important for consumers who are interested in such products to talk with their mortgage broker or financial advisor to ensure proper decisions are being made, taking into account one’s unique situation. In conclusion, it can pay off greatly to understand how these mortgages work to determine if this new loan product benefits homebuyers’ obligations and goals.

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