1. What Is Asset Depletion Calculation?

Asset depletion is a method used to calculate monthly income by dividing net assets (total assets minus reserves) by 360. This approach is commonly used in mortgage underwriting and financial planning to determine qualifying income.

2. How Does The Calculator Work?

The calculator uses the asset depletion formula:

Where:

• \( Assets \) — Total value of all assets (dollars)
• \( Reserves \) — Amount set aside as reserves (dollars)
• \( 360 \) — Standard divisor representing months

Explanation: This calculation determines the monthly income that can be generated by gradually depleting assets over time, typically used when traditional income documentation is insufficient.

3. Importance Of Asset Depletion Calculation

Details: Asset depletion calculation is important for individuals with significant assets but irregular income streams, such as retirees, investors, or self-employed individuals. It helps financial institutions assess borrowing capacity and financial stability.

4. Using The Calculator

Tips: Enter total asset value and reserve amount in dollars. Both values must be non-negative numbers. The calculator will compute the monthly income derived from asset depletion.

5. Frequently Asked Questions (FAQ)

Q1: Why is 360 used as the divisor?
A: 360 represents the number of months in 30 years, which is a standard timeframe used in mortgage underwriting for asset depletion calculations.

Q2: What types of assets are typically included?
A: Liquid assets such as cash, stocks, bonds, and retirement accounts are commonly included. Real estate and other illiquid assets may be considered with certain limitations.

Q3: How are reserves determined?
A: Reserves typically include emergency funds, down payment amounts, and other funds that need to be preserved and not used for income calculation.

Q4: Is asset depletion income considered reliable by lenders?
A: While accepted by many lenders, asset depletion income is typically weighted differently than traditional earned income and may have specific qualification requirements.

Q5: Can this calculation be used for retirement planning?
A: Yes, asset depletion calculations are commonly used in retirement planning to determine sustainable withdrawal rates from investment portfolios.