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Do Lenders Offer Asset Depletion HELOCs?

Do lenders offer asset depletion HELOCs?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Some lenders offer asset depletion home equity lines of credit (HELOC) although if you have significant assets such as stocks, bonds and other liquid investments you may be able to arrange a straight line of credit backed by your assets. A line of credit is collateralized by your assets as compared to a HELOC which is secured by your home.

The financing option that works best for you depends on the value of your home and how much equity you have as well as the amount and type of assets you hold. If you have sizeable assets but limited equity in your home then an asset backed line of credit is likely your best option. If you have significant homeowners equity -- such as if you have a high property value and low current mortgage balance -- then a HELOC may be a better option.

If you are interested in a HELOC, we recommend that you contact multiple lenders in the table below to find the best loan terms. When you compare terms, make sure to focus on the maximum draw amount and the interest rate after the introductory, or starter rate, expires.

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Current Home Equity Loan Rates as of October 23, 2019
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click for more information on rates and product details.

In some cases having an asset-backed line of credit may provide better loan pricing and more financial flexibility as compared to a HELOC. Depending on the maximum loan amount relative to your assets, the interest rate on an asset depletion line of credit may be lower than the rate for a HELOC, which is second in priority to any mortgage on the property.  Using an asset depletion line also enables you to preserve the equity in your home to access in the future.

Additionally, you may be able to arrange an asset depletion line of credit with a draw amount that varies based on the value of the underlying assets. So if your holdings increase in value, you may be able to borrow more money. This approach potentially compares favorably to a HELOC that offers a fixed maximum line amount for the entire loan term.

Review How an Asset Depletion Mortgage Works

Keep in mind, however, that if the value of your assets decreases, with an asset-backed line of credit your maximum draw amount may also decrease. In this scenario you may be required to pay down the line or sell a portion of your assets to meet the coverage ratio required by the lender.

If you are interested in an asset depletion line of credit, we recommend that you first speak with the bank or brokerage company that holds your savings or investment accounts and understand the asset-based financing options they offer. You should also compare their loan programs and terms to other lenders.

Asset depletion loans are usually offered by banks and wealth management companies with both mortgage and private banking operations that are looking to grow their assets. Examples include larger national banks, private wealth managers and portfolio lenders, which are banks that hold mortgages on their balance sheets instead of selling them.

You can also use the FREEandCLEAR Lender Directory to search over 3,900 lenders by loan program. For example, you can find top-rated lenders that offer asset depletion loans.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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