An asset-based loan or asset utilization loan uses assets as income. Whether you are a retiree with a small fixed income or a self-employed borrower, the ease and benefits of asset-based loans and mortgages have made them a popular solution for borrowers in recent years. This type of financing is especially popular among those looking for an alternative to a no doc loan.
Griffin Funding takes a common-sense approach to underwriting asset-based loans for a painless application process.
With an asset-based loan agreement, also known as an asset depletion loan, borrowers are granted a loan based on their assets. An asset-based loan or mortgage allows you to utilize the assets you have already invested in to secure the cash you need now.
Asset utilization loans can serve as great mortgage options for retirees, investors, and/or self-employed borrowers that have assets on-hand.
With an asset-based loan, you are essentially leveraging the value of your personal assets to secure financing. Here’s a breakdown of how this works:
Borrowing base calculation: The amount you can borrow is determined by the borrowing base, which is a percentage of the value of your assets. This base helps the lender assess how much they can confidently lend you based on the strength of your asset pool.
Types of assets: For asset-based mortgages, different assets are utilized in the following ways:
Retirement and Investment Accounts: Typically, up to 70% of the value from these accounts can be considered for the loan. This means if you have $100,000 in your retirement and investment accounts, you could potentially use $70,000 towards securing your loan.
Bank Accounts: You can use 100% of the value from your bank accounts. For example, if you have $50,000 in your savings or checking accounts, that entire amount can be factored into the loan process.
Determining loan terms: The final borrowing base and the specific terms of your loan—such as interest rates, repayment schedules, and overall loan amount—are determined by the lender. They will evaluate the value of your assets and assess your financial situation to tailor the loan terms to fit both your needs and their lending criteria.Jinnai Wealth Management
The types of liquid assets that can be used are checking accounts, savings accounts, certificates of deposit (CDs), money market accounts, mutual funds, stocks, and bonds. In some cases, asset statements alone may be used by high-net-worth individuals for qualification.
The assets presented for your loan must be easily convertible into cash. Assets that can be counted toward your income include:
Bank accounts (checking or savings)
CDs (certificates of deposit)
Investment accounts (stocks, bonds, and mutual funds)
Money market accounts
To calculate the qualifying amount of your asset-based loan, you will need to determine your maximum monthly loan paymentSurat Stock. First, you need to calculate the total value of your available assets. Then, divide the total by either 5 years, 7 years or 10 years depending on the asset-based loan program.
For example, you may have $600,000 in liquid verifiable assets and your total mortgage payment is $10,000 per month. Since you have 60 months’ worth of assets you would qualify and meet the ability to repay requirements.
Let’s consider a business owner named Sarah who wants to buy an investment property, but struggles to qualify for a conventional mortgage due to significant tax write-offs. To invest in real estate, Sarah turns to asset-based lending as an alternative. She has $150,000 in her checking and savings accounts and $500,000 in her retirement and investment accounts.
In this scenario, Sarah could qualify for a loan amount up to $500,000. This includes the full $150,000 from her bank accounts plus 70% of her $500,000 in retirement and investment accounts, which totals $350,000. By using asset-based lending, Sarah is able to secure the financing needed to pursue her real estate investment goals.
An asset-based SOFR loan is a valuable tool that can be used by high-net worth individuals to obtain funding for a new property purchase without having to show proof of income. In addition to this benefit, this type of loan has an interest rate that adjusts with the SOFR rate, which allows those with significant assets to potentially capitalize on lower interest rates without having to refinance.
The Secured Overnight Financing Rate is an index that calculates a weighted average of the interest rates that major financial institutions charge for overnight loans. When a mortgage is tied to this index, it is possible to get a mortgage rate that will automatically adjust to the 30-day average of the SOFR index.
With our 6 month SOFR Asset Utilization loan, you can take out an asset-based loan with a low-interest rate that’s locked in for a predetermined amount of time. Once that introductory period ends, your interest rate will begin to adjust every 6 months based on the SOFR index, meaning your rate could potentially rise or fall.
We currently offer:
6 month SOFR ARMs
3/6 SOFR ARMs (fixed-rate for 3 years and then adjusted every 6 months after that)
5/6 SOFR ARMs (fixed-rate for 5 years and then adjusted every 6 months after that)
7/6 SOFR ARMs (fixed-rate for 7 years and then adjusted every 6 months after that)Udabur Investment
10/6 SOFR ARMs (fixed-rate for 10 years and then adjusted every 6 months after that)
Chennai Investment
