Can I get a mortgage based on my investments instead of salary?

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1030danielle
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Can I get a mortgage based on my investments instead of salary?

Post by 1030danielle »

I’m partially retired due to inheritance.
Would like to buy a house. Have cash for 75 percent of it but would need to finance the rest.
I have dividend income and other investments in both taxable and retirement accounts.
Does anyone know if I can get a mortgage using what I’ve got invested as collateral?
Thanks in advance!
Danielle
stan1
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Re: Can I get a mortgage based on my investments instead of salary?

Post by stan1 »

Yes, shop around to find a lender who will work with you on an asset based mortgage.

First lender you talk to may not want to do it, but you will some who will. A mortgage broker might help. Mortgage brokers get paid on commission so they are motivated to find you a loan that meets your needs and that you close on. Plan in advance so you can get multiple quotes and have a relationship with a lender or two rather than trying to arrange all this in 48 hours so you can put an offer on a house you like.
Tingting1013
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Re: Can I get a mortgage based on my investments instead of salary?

Post by Tingting1013 »

How much taxable investments do you have and how large of a mortgage are you looking at?

With the right numbers a margin loan may be an option
oyster99
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Re: Can I get a mortgage based on my investments instead of salary?

Post by oyster99 »

I am interested in learning about this as well. Hopefully it's OK if I add some questions.

Is there an online resource for locating the apparently small number of lenders who will do asset-based mortgage qualification (e.g. something like depositaccoutns.com but for asset-based mortgages)?

Is it the case that for example, wells fargo branch #x (just picking WF as random example) might originate an asset-based loan but WF branch #y (even potentially in the same city) will not?

Equally useful would be a list of major lenders/banks who will not consider asset-based mortgages (i.e. don't waste time contacting them).

Can asset-based mortgages get sold after origination, like a regular mortgage loan, or will they generally stay with the originating lender forever?

Is it still possible to get an asset based mortgage if the home you plan to purchase is in a different state?
mrsgoldilocks
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Re: Can I get a mortgage based on my investments instead of salary?

Post by mrsgoldilocks »

Yes, I think you should be able to especially you're paying 75% down.
RubyTuesday
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Re: Can I get a mortgage based on my investments instead of salary?

Post by RubyTuesday »

Following with interest. Good luck
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willyd123
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Re: Can I get a mortgage based on my investments instead of salary?

Post by willyd123 »

You definitely can but you have to find a lender that does it. I looked into recently and I found a firm so I know they exist but I cannot find the firm's name in my records.
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orthros
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Re: Can I get a mortgage based on my investments instead of salary?

Post by orthros »

Yes. And Third Federal is one of those banks if you're so inclined.
SevenBridgesRoad
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Re: Can I get a mortgage based on my investments instead of salary?

Post by SevenBridgesRoad »

Retired for about three years. Buying a home in the Dallas TX area currently. Our real estate agent gave us the names of two local mortgage providers who make asset based (also called asset depletion) mortgages. Pre-qualified with both by phone within a few minutes. Asked a few questions about where the money would come from. Had to temporarily unfreeze all three major credit bureaus for a quick credit check. So, super simple on the pre-qual part. Both issued pre-qualifying letters to send with our purchase offer.

Finalizing the mortgage has been simple as well. One thing both bankers wanted was a history of regular withdrawals from Vanguard. Easy for us. For our retirement "paycheck" we have automatic withdrawals to our checking set up already. VG provides an easy way to print the screen showing the auto withdrawal schedule. This and two monthly statements from VG is all that the bank we chose required.
Williams57
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Re: Can I get a mortgage based on my investments instead of salary?

Post by Williams57 »

Tingting1013 wrote: Fri Jun 18, 2021 10:27 am How much taxable investments do you have and how large of a mortgage are you looking at?

With the right numbers a margin loan may be an option
This.
TropikThunder
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Re: Can I get a mortgage based on my investments instead of salary?

Post by TropikThunder »

SevenBridgesRoad wrote: Fri Jun 18, 2021 11:20 am Finalizing the mortgage has been simple as well. One thing both bankers wanted was a history of regular withdrawals from Vanguard.
That’s my understanding as well. The Fannie Mae selling guide says income and dividend income can be used to qualify based on a 2-year average of distributions (mainly because it’s regular distributions, not based on actions you take). Capital gains (and/or withdrawal of principal) can also be used but you need a two year history of actually making withdrawals rather than just a chunk of money sitting in a brokerage account. That said, not all banks need to conform to Fannie Mae guidelines to approve this kind of mortgage.
Last edited by TropikThunder on Sat Jun 19, 2021 2:15 am, edited 1 time in total.
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whodidntante
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Re: Can I get a mortgage based on my investments instead of salary?

Post by whodidntante »

IRAs cannot be collateral for a loan. If you have a large taxable brokerage account, this might be a good application for a margin loan.

Look into a margin loan with Interactive Brokers specifically, IBKR Pro. As a simple rule that is not correct for every situation, you will be able to take 50% of whatever marginable assets you have out in cash.

Advantages:
No closing costs. In fact, you can get a 1k bonus right now for transferring assets there. There is another promotion that lowers the margin interest rate which will be better if you plan to keep a big loan active for a long time.
It is extremely easy to get approved for margin. It basically involves asking for it, and if you haven't done horrible things you can expect approval within a few days.
No payments are required, ever. You can die with this loan if you prefer. Some people do that on purpose for tax reasons. However, IB does not do margin calls. If you fail to meet maintenance margin, IB will liquidate assets to bring your account in line.
Access to the money via ACH, wire transfer, and debit card is possible.

You can also negotiate your margin rate with your existing broker, but it is unlikely they will beat IB. I've heard of people negotiating 2% at E*Trade and 3.5% at Fidelity, and while that might sound good, both are more than what IB will charge.

You should transfer assets to IB at least 30 days prior, the first time you go about it. From there on you can take huge amounts of money at any time.
kevinpet
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Re: Can I get a mortgage based on my investments instead of salary?

Post by kevinpet »

1030danielle wrote: Fri Jun 18, 2021 10:14 am Would like to buy a house. Have cash for 75 percent of it but would need to finance the rest.
I have dividend income and other investments in both taxable and retirement accounts.
Does anyone know if I can get a mortgage using what I’ve got invested as collateral?
Another term to use when looking for this is "manual underwriting"
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Meg77
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Re: Can I get a mortgage based on my investments instead of salary?

Post by Meg77 »

Private banker here. Most lenders will consider a mortgage - a normal mortgage secured by the property itself - even to borrowers without stable employment who live off investments. The easiest way to qualify is if your taxable income itself - the dividends, interest, etc that shows up on your tax return - is sufficient to pay the mortgage. That type of income is just as relevant as wages or rental income or anything else.

If the investment income is not sufficient to service the debt, then some lenders can still proceed and may use other formulas to presume a possible income. For example you might have large balances in an IRAs that you haven't started tapping yet, or it's in a trust you have full access to, in which case the income from those investments wouldn't show up on your tax return. However different lenders will have different standards to convert that to an assumed income stream. You may simply be able to show a year's worth of monthly distributions from the account. Or they may take 4% of the balance and use that for possible/assumed annual income.

In these cases the mortgage will not fit conforming standards - say for Fannie Mae or Freddie Mac - so it cannot be packaged and sold off like most mortgages can. That's why not all lenders to them - or not all divisions of every bank. At many banks you wouldn't be able to do this kind of loan in the mortgage division, but the private bank division which holds its own loans would be able to (though you may have to meet asset or income minimums to work with the private bank).

This type of thing is very common and is why private banks exist at all. Plenty of not most wealthy people who are very active borrowers do not have taxable income or enough personal income to get normal retail financing. Private banks also do lots of investment lending where you can borrow against your investments themselves instead of getting a home/yacht/car loan. This is simplest as a margin line of credit, but a bank loan secured by investments could have a fixed rate, at least for a year or so, unlike a margin line. But you'll have to move your investments to that lender usually which may mean paying higher expense ratios.
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1030danielle
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Re: Can I get a mortgage based on my investments instead of salary?

Post by 1030danielle »

Williams57 wrote: Fri Jun 18, 2021 12:10 pm
Tingting1013 wrote: Fri Jun 18, 2021 10:27 am How much taxable investments do you have and how large of a mortgage are you looking at?

With the right numbers a margin loan may be an option
This.
Rough numbers:
Home price: $400,000
Cash available: $300,000
Cash needed: $100,000*
Investments in taxable accounts: about $1M.

*(I plan to sell an RV I’m currently living in once I buy a house. I can likely get $90K for RV… seems easier to sell it after I have the house.)
datageek
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Re: Can I get a mortgage based on my investments instead of salary?

Post by datageek »

1030danielle wrote: Fri Jun 18, 2021 10:14 am Does anyone know if I can get a mortgage using what I’ve got invested as collateral?
My mortgage is with Chase based on investments, not salary (and without a collateral).
I did move a significant portion of my investments into their brokerage account (I don't think it was required for the mortgage, but it gave me another 0.25% relationship discount). I later moved it to Fidelity because Chase's brokerage services aren't as useful.
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galawdawg
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Re: Can I get a mortgage based on my investments instead of salary?

Post by galawdawg »

Loans backed by Fannie Mae and Freddie Mac can use investment and retirement assets towards the income requirements. I believe that their formula takes 70% of qualifying assets (investments and retirement accounts) and 100% of cash holdings and divides it by the number of months in the loan product (one hundred eighty on a fifteen year mortgage, three hundred sixty on a thirty year mortgage) to determine your "monthly income" which they then use according to their standard underwriting requirements to determine your maximum payment and loan amount.

If you have $2 million in investments (retirement and taxable), you can count up to $1.4 million divided by the number of months of the mortgage as your monthly income. So for a fifteen (15) year loan, that would be equal to a monthly income of $7,777. For a thirty (30) year loan, that would be $3,888 counted as monthly income. Cash holdings are not discounted. Divide cash by the months of the loan and add that to the numbers above. That total would be your "monthly income."
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1030danielle
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Re: Can I get a mortgage based on my investments instead of salary?

Post by 1030danielle »

Thanks, all, for the info.
I’ll check out some of these suggestions.
Danielle
CurlyDave
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Re: Can I get a mortgage based on my investments instead of salary?

Post by CurlyDave »

1030danielle wrote: Fri Jun 18, 2021 10:14 am I’m partially retired due to inheritance.
Would like to buy a house. Have cash for 75 percent of it but would need to finance the rest.
I have dividend income and other investments in both taxable and retirement accounts.
Does anyone know if I can get a mortgage using what I’ve got invested as collateral?
Thanks in advance!
Danielle
DW and I just did something very similar. We refinanced our personal residence and 3 multi-family rental properties. 30 year loans, 2.5% on the residence, 3.25% on the rentals.

Easy-peasy, no problems at all.
Answering a question is easy -- asking the right question is the hard part.
mogg
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Re: Can I get a mortgage based on my investments instead of salary?

Post by mogg »

CurlyDave wrote: Sat Jun 19, 2021 9:36 am
DW and I just did something very similar. We refinanced our personal residence and 3 multi-family rental properties. 30 year loans, 2.5% on the residence, 3.25% on the rentals.

Easy-peasy, no problems at all.
What bank did you use for your mortgage?
CurlyDave
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Re: Can I get a mortgage based on my investments instead of salary?

Post by CurlyDave »

mogg wrote: Sun Jun 20, 2021 7:48 am
CurlyDave wrote: Sat Jun 19, 2021 9:36 am
DW and I just did something very similar. We refinanced our personal residence and 3 multi-family rental properties. 30 year loans, 2.5% on the residence, 3.25% on the rentals.

Easy-peasy, no problems at all.
What bank did you use for your mortgage?
We got the loans through People's Bank. My previous relationship with them is that I was driving down the street and they had one of those programable signs out front advertising 2.5% home loans, so I pulled into their parking lot and walked in.

They sold the loans to another servicer, but they told us they were going to do that, so no big deal. And they all went to the same servicer, who has been very good.
Answering a question is easy -- asking the right question is the hard part.
desconhecido
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Re: Can I get a mortgage based on my investments instead of salary?

Post by desconhecido »

We are in a similar situation in that we have substantial IRAs and brokerage assets but tax reported income is not very high. Chase did for us what was described above -- considered 70% or so of the IRAs and divided by 360 for a monthly number. Our experience with Chase was really quite exceptional. From first contact to closing was about 29 days and the mortgage guy was really great in working through all the details and preparing the package for the underwriters to analyze.
geegecko
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Re: Can I get a mortgage based on my investments instead of salary?

Post by geegecko »

I'm looking into this as well. Mortgage balance 75K on 190K patio home. 18 years left on a 30 year 4.875 fixed mortgage. Retired with no W-2 income; net worth of about 2M. I do not want to sell holdings in taxable brokerage to pay off note.

I was thinking of opening a brokerage line of credit to cover the 75K balance with no closing costs. I was looking for a 2% note or so and I would probably pay it off within 5 or 6 years.

Is this possible?

Thank you in advance.
dbr
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Re: Can I get a mortgage based on my investments instead of salary?

Post by dbr »

1030danielle wrote: Fri Jun 18, 2021 4:17 pm
Williams57 wrote: Fri Jun 18, 2021 12:10 pm
Tingting1013 wrote: Fri Jun 18, 2021 10:27 am How much taxable investments do you have and how large of a mortgage are you looking at?

With the right numbers a margin loan may be an option
This.
Rough numbers:
Home price: $400,000
Cash available: $300,000
Cash needed: $100,000*
Investments in taxable accounts: about $1M.

*(I plan to sell an RV I’m currently living in once I buy a house. I can likely get $90K for RV… seems easier to sell it after I have the house.)
Offhand it would not seem necessary to jump through the hoops to borrow anything at all. On the other hand 75% down with your assets, etc. should work. Can you just get a short term personal loan of some kind and pay it back in no more than a year by selling the RV?
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beernutz
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Re: Can I get a mortgage based on my investments instead of salary?

Post by beernutz »

1030danielle wrote: Fri Jun 18, 2021 4:17 pm
Williams57 wrote: Fri Jun 18, 2021 12:10 pm
Tingting1013 wrote: Fri Jun 18, 2021 10:27 am How much taxable investments do you have and how large of a mortgage are you looking at?

With the right numbers a margin loan may be an option
This.
Rough numbers:
Home price: $400,000
Cash available: $300,000
Cash needed: $100,000*
Investments in taxable accounts: about $1M.

*(I plan to sell an RV I’m currently living in once I buy a house. I can likely get $90K for RV… seems easier to sell it after I have the house.)
In your situation I'd sell $100k of taxable and pay cash for the house. Then sell the RV and reinvest and you're down only $10k.

This x2 if I had tax deferred investments in addition to the above.

I have had mortgages and their interest rates are historically low ATM but not having one every morning I wake up is the best feeling.
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bltkmt
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Re: Can I get a mortgage based on my investments instead of salary?

Post by bltkmt »

desconhecido wrote: Sun Jun 20, 2021 8:30 am We are in a similar situation in that we have substantial IRAs and brokerage assets but tax reported income is not very high. Chase did for us what was described above -- considered 70% or so of the IRAs and divided by 360 for a monthly number. Our experience with Chase was really quite exceptional. From first contact to closing was about 29 days and the mortgage guy was really great in working through all the details and preparing the package for the underwriters to analyze.
Are you a Chase Private Bank client?
desconhecido
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Re: Can I get a mortgage based on my investments instead of salary?

Post by desconhecido »

bltkmt wrote: Mon Jun 21, 2021 3:37 pm
desconhecido wrote: Sun Jun 20, 2021 8:30 am We are in a similar situation in that we have substantial IRAs and brokerage assets but tax reported income is not very high. Chase did for us what was described above -- considered 70% or so of the IRAs and divided by 360 for a monthly number. Our experience with Chase was really quite exceptional. From first contact to closing was about 29 days and the mortgage guy was really great in working through all the details and preparing the package for the underwriters to analyze.
Are you a Chase Private Bank client?
No.

We were looking for a house, but not for long, in this market -- it's pretty much jump or go home. When we got close to making an offer, I cold-called the "Home Lending Advisor" at the Chase branch closest to our home. It turned out to be, from our perspective, the best interaction that we ever had with a lender's representative.

During the process, we were contacted by a Chase rep who tried to get us signed up as a "Private Bank client" but we declined and that seemed to be ok.

All the interactions we had with Chase and their local reps in Houston were very good, or better.
mr_brightside
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Re: Can I get a mortgage based on my investments instead of salary?

Post by mr_brightside »

another thing you could do is get an immediate single premium annuity -- convert like $150K into an income stream paid back to you over 60 months...

that would be a way to show about $3k / month in income. a $100k 30 year mortgage would be around $500 / month.

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