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Why Does Mortgage Lender Ask for Depreciation Schedule?

Why does a mortgage lender ask for a depreciation schedule?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Lenders typically ask for a depreciation schedule if you own an asset, such as investment real estate, that generates meaningful depreciation. Lenders consider depreciation a passive expense, which means it can be added back to your income to determine what size mortgage you can afford. Adding back depreciation to your income typically improves your ability to qualify for a mortgage or enables you to afford a larger mortgage. Please note that lenders usually only add back depreciation that is attributable to long lived assets such as real estate. Appreciation that is attributable to shorter-lived assets, such as piece of machinery, are not typically be added back to your income.

In most cases, providing a depreciation schedule to a lender benefits the borrower but I recommend that you contact your lender to determine the reason for the request.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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