Asset Depletion: Turning a Portfolio Into a Paycheck
Key takeaways
- Depletion divides eligible assets by a divisor (60–240 months) to synthesize monthly income — no liquidation happens.
- Haircuts vary by asset class: ~100% cash, 70–90% securities, 50–80% retirement (often age-gated).
- Two investors can derive incomes 40% apart from identical statements — shop the divisor.
- Watch post-close liquidity requirements; they surface late and kill marginal files.
The retired engineer with $2.4 million across Schwab and an IRA gets declined by the bank that manages the money — no income. Asset depletion is the Non-QM answer: treat the portfolio as a stream of payments and qualify the borrower on math instead of employment.
The calculation, step by step
- Inventory eligible assets: cash, brokerage, retirement accounts (age rules apply), sometimes vested equity.
- Apply the class haircuts — a $1M brokerage account might count as $750K–$900K.
- Divide by the program divisor: 84, 120, 180, or 240 months depending on the investor.
- The result is monthly qualifying income, blendable with social security, pensions, or part-time W-2.
Why the divisor is everything
$1.8M in post-haircut assets over 240 months is $7,500/month. The same assets over 84 months is $21,400/month. That's the difference between a decline and an approval on the identical borrower — which makes divisor-shopping the core skill of this product. It also makes the desk question 'who divides by what' one of the highest-value guideline lookups an LO can run.
Where these files break
Pledged or margined assets get excluded at underwrite. Crypto rarely counts. Recent large deposits need sourcing — the business-sale wire needs its paper trail attached, not promised. And several programs run a post-close liquidity test requiring meaningful assets left after down payment and reserves; find that requirement on day one, not in condition review. Coach the borrower to freeze account shuffling during the process — every transfer between statements is a letter of explanation waiting to happen.
The conversation that opens the file
"We don't need income — we need statements." Financial advisors are the referral source here: they have clients house-shopping with no W-2 and no idea this product exists. One lunch with a wealth manager who understands you can close their asset-rich clients is worth a quarter of cold calls.