Asset Based Mortgages

Asset Based Mortgages

December 15, 2022

A brief summary

Asset based mortgages offer real estate investors a different way to obtain funding for a property purchase. This involves using the asset (the property) as collateral for the loan and basing loan approval on this instead of the borrower’s personal finances. For self-employed real estate investors and those who have bad credit, this can be a good funding solution.

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Real estate investors who don’t qualify for traditional loans, or would prefer to use an alternative financing option can look at asset based mortgages. Asset based loans are typically based on the asset itself, instead of the borrower’s personal finances. This means that loan approval is given based on assets or investments, as opposed to a borrower’s income, credit history and employment.

It’s easy to understand why these loans may appeal to many real estate investors, so we’ll take a closer look at how asset based mortgages work, how to apply for them and which reputable lenders offer them.

What Is An Asset Based Mortgage?


An asset-based mortgage is a type of loan that allows borrowers to access the value of their assets to get the cash they need. It’s particularly useful for those who have complex incomes or have a hard time qualifying for conventional bank loans. By leveraging their assets as collateral, borrowers can get access to funds without having to use their income as the basis for the loan.

Asset based mortgages don’t require applicants to provide detailed proof of income, which means that these mortgages are an easier and faster way to get a loan than going the traditional route. People looking for asset-backed real estate financing can turn to reputable lenders who specialize in this type of loan and will be able to help them decide if this is the right solution for their needs. It’s important to note that liquid assets are typically preferred as collateral on these loans.  

The Different Types of Asset Based Mortgages

When it comes to real estate, properties such as land, retail office space and residential properties are considered assets. These can be used for asset based lending, from a lender that offers these types of loans. There are 2 types of asset based mortgage terms that borrowers can choose from:


  1. Traditional loan terms

The first type of asset based mortgage is an advance of capital offered to a borrower that is secured by the value of an asset. For traditional term asset based loans, borrowers will have set repayment terms in the form of monthly mortgage payments, to settle the principal debt and interest gained over a given period. Real estate investors would typically use this type of loan to purchase a rental property, and then use the rental income to cover the monthly mortgage payments.


  1. Lines of credit

For asset based loans that offer lines of credit, the asset still secures the loan, however borrowers can access a line of credit as they need it. These loans would be more commonly used for projects where borrowers need to do repairs and renovations on a property, for example a fix and flip project.


An asset depletion loan is a way for borrowers to qualify for a loan based on the asset, instead of their own employment and income. Lenders will use the value of a borrower’s liquid assets and split it over a period of 360 months, to determine the borrower’s “monthly income” for the asset depletion loan. This will indicate what a borrower can afford for monthly payments, without factoring in their employment or income. Borrowers can choose to add in their income, or leave it out, when applying for an asset depletion loan.

Real estate

How Do You Qualify for Asset Based Lending?

Qualifying for an asset based mortgage is based on the asset itself. So, the main requirement that is necessary to qualify for an asset based mortgage for real estate is a property. There should also be liquid assets available such as cash, stocks and other securities. This is because lenders may want liquid assets as an extra security for the loan if it’s based on real estate. All assets will need to be in the name of the borrower for them to qualify for a loan.

Assets that qualify as collateral for an asset based loan include: cash, securities such as bonds and stocks, hard assets like real estate and cars, and assets that generate an income.

Asset Based Mortgage vs Traditional Loan - What's The Difference?

Asset Based Mortgage Traditional Loan
The mortgage approval is based on the asset itself, and this includes the quality of a real estate deal. Loan approval hinges on the borrower’s personal finances, such as income verification and credit score, as well as the property’s projected cash flow.
This is a flexible way to borrow money because borrowers simply need to prove that they can afford the monthly payments and that their assets can be used as collateral. This is an inflexible way to borrow, as loan qualifications are standardized and cannot be adjusted to each situation to account for other factors.
Asset based mortgages are easier to qualify for, based on the flexibility afforded to borrowers who may not have the best credit. Traditional loans are more difficult to qualify for, based on the stringent and inflexible qualification requirements.
These mortgages can provide more funds because they’re based on the entire value of the asset itself. These loans may provide less funds, as they’re based on the cash flow of the property in the future.
Asset based mortgages are not subject to regulatory reviews the same way banks would be. Which can be problematic for investors who may have a loan and after the review, no longer qualify for the loan. Traditional loans are subject to regulatory reviews which can impact current borrowers.
The cash flow that asset-based mortgages offer can be managed according to what the borrower chooses, which creates flexibility. The cash flow from a traditional mortgage is paid out as a lump sum and a fixed payment is made every month to repay the loan.

List of Reputable Asset Based Mortgage Lenders

Buying real estate

New Silver

New Silver is a hard money lender providing loans that are based on real estate deals. New Silver’s fix and flip loans, for example, are based on the deal itself and the profit potential of it. New Silver offers funding in as little as 5 days, and online approval within 5 minutes. The entire process can be done online and the lender operates in over 41 states.

Rocket Mortgage

Rocket Mortgage is an asset based mortgage lender. Loan closing times are under 30 days, and the credit requirements are a minimum credit score of 580. Rocket Mortgage offers a variety of loans for those looking to buy a property or refinance their current property. The lender’s interest rates start at 5.99% and vary depending on each loan.

New American Funding

New American Funding provides loans in 31 to 40 days, with a minimum credit score requirement of 620. The lender provides various mortgage loan options, some of these are asset based and focused on using real estate as collateral for the loan.

How To Apply For An Asset Based Loan

Apply for an asset based mortgage

Applying for asset based financing is typically quicker and easier than applying for a traditional mortgage.

Step 1: Choose a lender

Picking the right lender for your specific goals, is the first step. The trick is to find a reliable lender and get to know their loan requirements before you continue down this path. That way, you’ll know what they need from you at the outset and you can gather the relevant information.

Step 2: Determine the value of the property

Your next step towards getting approved for an asset based loan is to get the property appraised to determine its value, and any potential appreciation that may occur. Once you have this figure, you’ll be able to apply for the mortgage based on this. This should also include the profit-generating capabilities of the property and the cash flow.

Step 3: Check the property’s records

Once you’ve determined the value of the property, it’s a good idea to check the records and make sure there is no debt against the property or any liens. Lenders will perform this check themselves as well, but it’s important to make sure of this before you apply for a loan, as lenders may not provide a loan for a property that has liens against it.

Step 4: Submit your application

Once you’ve done the steps above and gathered the necessary documents required by your chosen lender, it’s time to apply. There will be an application to fill in, and you can submit this along with the documents about your property, it’s value and so on. The lender will then review your application and if they are considering lending to you, the due diligence period will begin for the property.

Step 5: Due diligence and loan terms

The next step is to conduct the necessary due diligence on the property, and the lender will then make a final call about whether or not they are willing to continue towards loan approval. If they intend to approve you, the lender will provide loan terms, including the length of the loan, the amount that will be provided and all other necessary details. If you’d like to go ahead with the loan, you’ll sign the term sheet. There may be more paperwork to sign thereafter and then your asset based mortgage approval will come through.


You may be able to obtain a mortgage based solely on your assets, but it depends on the lender. Typically, lenders will consider non-traditional forms of income, such as investments or income from real estate, when determining if an individual qualifies for a loan. With that being said, you will need to have enough liquid assets available in order to cover the down payment and any additional closing costs associated with the purchase.


Furthermore, most lenders will give preference to applicants who have sufficient income to cover their monthly mortgage payments along with other obligations over those who rely solely on their assets to qualify for a loan.


It is important to keep in mind that asset-based mortgages generally carry higher interest rates due to the increased risk involved for the lender. Ultimately, it is essential to speak with a lender before applying for any type of asset based loan program, so that you are adequately prepared and understand all the options available to you.

Asset depletion in real estate refers to a technique used by investors to unlock the value that has been built up in a property over time. By using this strategy, investors are able to withdraw funds from their investment without selling the property or taking on additional debt. This can prove beneficial for those who wish to preserve their asset and yet benefit from its growth in value over time.


The process involves taking out a loan against all of the equity within the property and then paying off the loan with these funds. This allows people to benefit from their investment while still retaining ownership of it, and then capitalize on future gains as they arise.

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