Asset Dissipation: Financing Your Home with Liquid Assets

A family is in front of their house.

Asset dissipation, sometimes called "asset utilization," "asset depletion" or an "asset-based loan," allows individuals to finance a home based on liquid assets they possess, such as money in bank accounts, stocks or even retirement accounts. Asset dissipation can be useful for mortgage-seekers with significant assets who don't have a lot of income, but there are a couple of drawbacks.

Assets Are At Risk

When a mortgage-seeker signs an asset depletion loan, he is putting his assets at risk. If he defaults on his mortgage payments, a lender can take possession of the assets he used for collateral, whether they were property such as a vehicle or money tied up in investments.

High Down Payments

Lenders take a substantial risk when they approve a mortgage loan for an individual who does not have a high level of verifiable income on his tax returns. As such, asset dissipation loans typically require a large down payment. Bank of America reports that typical mortgage loans require a down-payment of between 5 and 20 percent. By contrast, Fannie Mae and Freddie Mac require a 30 percent down payment on asset-based mortgage loans.