Asset Depletion Calculator Mortgage Interest

Asset Depletion Formula:

\[ Income = \frac{(Assets - Down\ Payment - Reserves)}{360} \]

Assets (qualified assets, dollars):

Down Payment (down payment, dollars):

Reserves (reserves, dollars):

Income (monthly income, dollars):

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1. What is the Asset Depletion Calculator?

The Asset Depletion Calculator estimates monthly income for mortgage qualification purposes by considering a borrower's liquid assets after accounting for down payment and reserve requirements.

2. How Does the Calculator Work?

The calculator uses the asset depletion formula:

\[ Income = \frac{(Assets - Down\ Payment - Reserves)}{360} \]

Where:

\( Assets \) — Total qualified liquid assets (dollars)
\( Down\ Payment \) — Amount allocated for down payment (dollars)
\( Reserves \) — Required reserve funds (dollars)
360 — Standard divisor representing months (30 years)

Explanation: This calculation helps lenders determine what monthly income can be derived from a borrower's assets for mortgage qualification purposes.

3. Importance of Asset Depletion Calculation

Details: Asset depletion is particularly important for self-employed borrowers, retirees, or those with significant assets but irregular income streams who need to qualify for a mortgage.

4. Using the Calculator

Tips: Enter all values in dollars. Assets should represent qualified liquid assets. Down payment and reserves should reflect the actual amounts being used or required for the mortgage.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets qualify for this calculation?
A: Typically, liquid assets such as cash, savings, investments, and retirement accounts that can be easily converted to cash.

Q2: Why is the divisor 360?
A: The divisor of 360 represents 30 years (360 months) of mortgage payments, which is a standard timeframe used by lenders for asset depletion calculations.

Q3: Are there different divisor values used by lenders?
A: Some lenders may use different divisors based on the borrower's age or loan terms, but 360 months (30 years) is the most common standard.

Q4: How do reserves affect the calculation?
A: Reserves are subtracted from assets because they represent funds that must be maintained and cannot be used for income derivation.

Q5: Can this calculation be used for all mortgage types?
A: While the principle applies broadly, specific requirements may vary by loan program and lender guidelines.