Asset based mortgage

[Splash]

2 years ago we got an asset based HELOC from a regional bank for 70% of the appraised value of our home. We were 57 years old and living off our taxable investments. We had to provide copies of all investment statements. I'm sure there was some formula they used but I don't know what it was.

 

[Willers]

The highest federal tax bracket is 37% so if you normally pay 12% that is an extra 25% in federal taxes but it would only need to be on one month's IRA transfers on the bare minimum annualized amount you need to meet the lender's qualifying ratios.

Assuming you found a lender that would allow only a one month look at income to qualify I agree that the cost would be minimal. I believe finding such a lender would be more than a bit challenging. If you know of such lenders I’m all ears and would love some references. That situation would be ideal for us.

 

[Willers]

2 years ago we got an asset based HELOC from a regional bank for 70% of the appraised value of our home. We were 57 years old and living off our taxable investments. We had to provide copies of all investment statements. I'm sure there was some formula they used but I don't know what it was.

Do you mind sharing the name of the bank?

 

[ncbill]

I'm late to this thread but I thought I'd add to the "no problem if making regular withdrawals". We bought a new house in 2019, financed 80% (many hundred k) with no regular income with a local broker. Our monthly deposits from our taxable brokerage account to our checking account met the income criterion. They looked at our IRA balances etc. but were only interested in the monthly draws. They told us at the time we needed to have at least 3 month pattern of withdrawal. We have since refinanced (30 yr, 2.85%) trough the Costco program and again no problem as long as we had those fixed monthly transfers from brokerage to checking (but we now also have DW's (small) SS check too).

So, depositing $20k/month from a brokerage account into a checking account for 3 months minimum qualifies me (using affordability calculators) for a nearly $1 million mortgage?

Sign me up!

 

[daylatedollarshort]

Assuming you found a lender that would allow only a one month look at income to qualify I agree that the cost would be minimal. I believe finding such a lender would be more than a bit challenging. If you know of such lenders I’m all ears and would love some references. That situation would be ideal for us.

Check out the Costco Mortgage program lenders, especially NASB and NBKC Bank. We refinanced with NBKC with a one month IRA transfer history. If you want to PM me I can give you our contact names at each bank and more details. I probably contacted at least 6 of the lenders in the Costco program and they were all pretty consistent with a 1 month IRA transfer history. They may count taxable as well per fostersciks' experience, but I didn't ask about that, so in my experience I can only speak to the IRA transfers.

Link: Mortgage Services | Costco

 

[daylatedollarshort]

So, depositing $20k/month from a brokerage account into a checking account for 3 months minimum qualifies me (using affordability calculators) for a nearly $1 million mortgage?

Sign me up!

If you can also show $20K X 36 months worth of assets, apparently so, at least with some lenders.

 

[jazz4cash]

Yes, they would probably have to keep a loan of this type in-house and not sell it off..

If they comply with the Fannie or Freddie guidelines it shouldn’t be an issue to sell it off.

 

[jazz4cash]

I agree. It's strange. I explored an asset based mortgage through Schwab and would have gone that route but it was unnecessary.

That’s interesting. Im a bit surprised the big firms like Schwab, Fido, and VG don’t partner with a mortgage lender and promote these loans. Maybe I’m just not aware.

 

[FlaGator]

^^^^
Schwab does, through Quicken Loans. I have no knowledge of Fido or VG

 

[themillerman]

If you have social security, annuity or pension income and excellent credit, it should not be a problem finding a mortgage underwriter. Just be able to document several previous years of sufficient income from some source commensurate with the size mortgage you'd like (payment not greater than 40% income and reasonable other debt).

 

[Scuba]

Did that taxable income on your returns include irregular Roth conversions or irregular tax-deferred account withdrawals? Or more just interest and dividends? Include capital gains?

No IRA or Roth withdrawals of any kind. Dividends, interest, capital gains on taxable brokerage account plus some deferred compensation that has been annuitized into a moderate income stream.

 

[Scuba]

I’ll spare everyone the details of our tax situation but I’ll just say that we also have some other non-recurring income that came in this year that puts us in a high bracket for any additional ordinary income.

Then now is the time to do a financing transaction!

 

[rayvt]

That's a good question. When we did our mortgage (2019) based on monthly TIRA withdrawals, the lender wanted to see the money show up in our bank account statement.

Did this is 2019 and 2020.

One time the underwriter wanted to see the deposit hit our checking account for 2 months. The other time, the underwriter just wanted to see the "periodic withdrawal order" the the broker had on file. Didn't even want to see the deposit.

You can cancel the withdrawals after the loan closes. Once, as soon as the loan closed, I called the broker and told him I wanted to re-deposit the check back to the IRA. (I showed the lender the check, they didn't need to see me deposit it to my checking account.)
He said instead he could just cancel the check, which he did.

 

[rayvt]

My conclusion is that a broker or mortgage company that specializes in these products is necessary. Having the blessing of Fannie and Freddie should make it routine but it doesn’t seem to work that way.

Aimloan and Amerisave. Both do these all the time. I have refi'ed several times with each of them. They also generally have among the lowest rates around.

I think this is becoming more and more common as baby-boomers retire.

 

[indiajust]

secured loans are only offered against the collateral in your account. like schwab. you don't go to a bank and take out a mortgage against assets in schwab. you go to schwab.

 

[rayvt]

Assuming you found a lender that would allow only a one month look at income to qualify I agree that the cost would be minimal. I believe finding such a lender would be more than a bit challenging. If you know of such lenders I’m all ears and would love some references.

Aimloan and Amerisave

I have been recommended Dan Cohen at Amerisave, (404)324-4966.

The key person is not the loan officer but the underwriter that looks at your information. And you cannot speak directly to the underwriter.

At various refi's I have been told:
a) "The underwriter wants to see 2 months of the systematic IRA withdrawal hit your checking account."
b) "The underwriter wants (only) to see the systematic withdrawal instruction letter to your broker."
c) "The underwriter wants to see your current checking account statement showing a deposit from your IRA broker."
d) "Nah, it's fine. The underwriter is satisfied with your IRA balance."

BTW, in the last 5-6 refi's, only once have they wanted to see my 1040. Been retired 15 years.

 

[RobbieB]

Merrill Lynch - B of A. Have half million line of credit based on investment.

 

[Scuba]

Aimloan and Amerisave

I have been recommended Dan Cohen at Amerisave, (404)324-4966.

The key person is not the loan officer but the underwriter that looks at your information. And you cannot speak directly to the underwriter.

At various refi's I have been told:
a) "The underwriter wants to see 2 months of the systematic IRA withdrawal hit your checking account."
b) "The underwriter wants (only) to see the systematic withdrawal instruction letter to your broker."
c) "The underwriter wants to see your current checking account statement showing a deposit from your IRA broker."
d) "Nah, it's fine. The underwriter is satisfied with your IRA balance."

BTW, in the last 5-6 refi's, only once have they wanted to see my 1040. Been retired 15 years.

Wow! I’ve been asked for our 1040, actually two years of 1040’s, every single time I’ve done a mortgage transaction whether it was a purchase or a refi. And our credit scores have always been excellent, and we’ve had plenty of assets for many years. Wonder why the difference? This has happened on our transactions whether we used various mortgage brokers (our usual approach) or a bank we had accounts with.

 

[newlyold]

It's not the buyer's mortgage market for you anymore

Mortgage companies got burned badly when the housing bubble burst, and our experience has reflected their changed priorities.

Example: With a $600K home fully paid off, and me running my own successfully property management business ($15M gross income + assets), AND with my wife working at $250K/year job, I went to a bank for a mortgage.

I'd found a second home on a lake in northern Minnesota that was for sale by out-of-state owners who couldn't keep up with the property anymore due to their age. I asked the bank for a low-interest loan. The property was $800K, and I was willing to put down $700K in cash. I wasn't willing to put more cash than that into it, just in case of unexpected emergencies.

The bank turned me down, despite my credit rating of 842.

I was dumbfounded. They weren't interested in loaning money to me at a low rate unless I was ready to put up my home & business assets as collateral.

I thanked them for the information and went to four other lenders in the area; all had the same response.

Banks & lending companies must have REALLY gotten hit hard by that lending crisis / housing bubble burst.

I ponied up the extra money & paid the owner in cash after negotiating a lower price for 100% cash.

 

[Koolau]

Mortgage companies got burned badly when the housing bubble burst, and our experience has reflected their changed priorities.

Example: With a $600K home fully paid off, and me running my own successfully property management business ($15M gross income + assets), AND with my wife working at $250K/year job, I went to a bank for a mortgage.

I'd found a second home on a lake in northern Minnesota that was for sale by out-of-state owners who couldn't keep up with the property anymore due to their age. I asked the bank for a low-interest loan. The property was $800K, and I was willing to put down $700K in cash. I wasn't willing to put more cash than that into it, just in case of unexpected emergencies.

The bank turned me down, despite my credit rating of 842.

I was dumbfounded. They weren't interested in loaning money to me at a low rate unless I was ready to put up my home & business assets as collateral.

I thanked them for the information and went to four other lenders in the area; all had the same response.

Banks & lending companies must have REALLY gotten hit hard by that lending crisis / housing bubble burst.

I ponied up the extra money & paid the owner in cash after negotiating a lower price for 100% cash.

Yes, from "no doc" to "multi-doc" I guess. When we went for our mortgage back in 2010, you'd have thought we had leprosy. We went to the bank we had a long history with and they demanded half down. We could have paid cash, but would have then had to pay taxes at top rate to cash in 401(k). Mentioned earlier, we were able to show "income" but it was all just so bogus.

At one time, there was a saying that banks only leant money to those who didn't need it. I think those days are back but YMMV.

 

[jazz4cash]

Aimloan and Amerisave. Both do these all the time. I have refi'ed several times with each of them. They also generally have among the lowest rates around.

I think this is becoming more and more common as baby-boomers retire.

Thanks. That’s good to know. I’ve noticed Aim and Amerisave generally having great rates but I was a bit skeptical. Are these actually asset depletion loans or do you have to set up distributions to get approved.

It also just dawned on me if you have assets in a regular brokerage account rather than IRA or 401k the Fannie/Freddie guidelines don’t apply.

 

[Broland]

I have a second home I took out a mortgage on to invest a few years ago and had no issues (3.25%). I also showed "no income" other than IRA withdrawals which are inconsistent because I only withdraw when I want to buy something (I try to stay almost 100% invested in the market). There was no problem at that time.

My how the times have changed ... With rates lower I tried to refinance and never succeeded (I have more than sufficient assets with pre and post monies to even pay the whole thing off), but because of "no income" it wouldn't fly.

So, I escalated and spoke to various vendors managers and underwriters and received a very consistent answer "show a -consistent- IRA withdrawal and we will consider that as income". I haven't pursued it yet to see if it works, but 3 different vendors said the same thing. Good luck!

 

[cat4ever]

I've heard from other posters that some banks will look at regularly scheduled tIRA withdrawals to your bank account as income....

+1 And yes, it makes no sense, but it works. I did it with 401K monthly scheduled withdrawals. As soon as you get the loan, you can stop the withdrawals. And again, yes it makes no sense, so don't try, just do

 

[rayvt]

"I've heard from other posters that some banks will look at regularly scheduled tIRA withdrawals to your bank account as income...."

+1 And yes, it makes no sense, but it works. I did it with 401K monthly scheduled withdrawals. As soon as you get the loan, you can stop the withdrawals. And again, yes it makes no sense, so don't try, just do

The very first mortgage I got after retiring, I went through this argument. With the loan officer, not the underwriter (who is the real decision maker).
I said, "What's the difference if I make a monthly withdrawal from my regular (taxable) broker account vs. my IRA account at the same broker."

She said, "We view an IRA as a retirement account and the withdrawals from that is income, whereas an withdrawal from a non-IRA account is just you writing a check to yourself."

Me: " It's no different!!! It's the same name on the account, and the same broker."
Her: "It is to us. You could just stop taking the withdrawals from your regular account."
Me:

So....in their minds, a retirement account is "income" and a non-retirement amount is just ... your own money.

She did say that I could stop the IRA monthly withdrawals after the loan closed, because "After all, somebody could also lose their job after the loan closed."

Basically, they want to see something that looks like a paycheck. A standing instruction to your IRA custodian for a monthly distribution looks like that. To them. After all, it's not just you doing whatever you want, moving your money around between your non-IRA accounts. There's a custodian involved. World of difference. To them.

 

[Brat]

My daughter and her husband recently purchased a vacation home secured by her holdings of a particular stock. She told me that it had a lower interest rate than a mortgage. She is differently situated than almost all of us as her income is more than adequate to obtain a mortgage and her non-IRA investments are substantial. She lives in California (which may make a difference) but if posters want to know I could ask her for the name of the lender.