Asset Depletion Calculation Methods

How lenders calculate qualifying income from assets, including depletion period variations and hybrid approaches

Asset depletion converts a lump sum of assets into a monthly qualifying income figure. The calculation is straightforward, but lenders vary significantly in the depletion period they use, which directly affects how much monthly income you qualify with.

The Standard Formula

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

Example:

Item	Amount
Eligible assets	$2,000,000
Down payment	$150,000
Closing costs	$20,000
Net eligible assets	$1,830,000
Depletion period	360 months
Monthly qualifying income	$5,083

Depletion Period Variations

The depletion period is the denominator—the number of months the lender divides your assets by. It has a major impact on qualifying income:

Depletion Period	Monthly Income on $1,000,000
60 months	$16,667
84 months	$11,905
120 months	$8,333
240 months	$4,167
360 months	$2,778

A lender using a 60-month depletion period will qualify you for roughly six times more monthly income than one using 360 months—on the same asset base.

Why lenders choose different periods:

• 360 months mirrors the 30-year loan term (conservative—assumes assets deplete over the life of the loan)
• Shorter periods assume faster asset drawdown (more aggressive, more favorable to the borrower)
• Some lenders peg the depletion period to the borrower’s remaining life expectancy

Asset Discounting

Lenders don’t always count 100% of your eligible assets. Common discounts:

• Investment accounts: 70-80% of current value
• Retirement accounts: 60-70% of current value

Effect of discounting on a $1,500,000 portfolio (50% stocks, 50% retirement):

Asset Type	Balance	Discount	Eligible
Investment account	$750,000	20%	$600,000
Retirement account	$750,000	30%	$525,000
Total eligible			$1,125,000

The $375,000 difference from discounting means meaningfully less qualifying income.

Combining Asset Depletion with Other Income

Many lenders allow asset depletion income to be added to other qualifying income sources:

• Asset depletion + bank statement income — Strong hybrid for business owners with both cash flow and savings
• Asset depletion + rental income — Useful for borrowers with investment property income
• Asset depletion + Social Security or pension — Common for retirees with supplemental savings

Adding sources increases total qualifying income and can help bridge gaps when one method alone falls short.

Shopping for the Best Depletion Terms

Because depletion period varies significantly by lender, comparing programs is essential:

• Ask each lender their standard depletion period
• Ask whether shorter periods are available for larger asset bases
• Ask how they discount investment and retirement accounts
• Calculate your qualifying income under each lender’s methodology before choosing

A lender offering a 120-month depletion period will produce three times the monthly income of one using 360 months—a difference that can determine whether you qualify at all.