For high-net-worth individuals with substantial assets but irregular income streams, owning a luxury home through traditional methods may seem out of reach. Conventional lenders require stable wages to qualify borrowers for jumbo mortgages on million-dollar homes. But asset utilization mortgages provide an alternative path to buying that dream property.
This post will show how retirees, investors, paid entertainers, trust fund beneficiaries, and other niche borrowers can leverage savings to purchase premium real estate in high-cost markets.
Retirees – Buying in Paradise with Retirement Funds
For retirees, an asset utilization mortgage allows you to tap retirement savings for a piece of paradise.
John and Michelle, both 60, worked hard and built up $1.8 million in their 401(k) and IRA accounts. Two years into retirement, they have their eyes on a $1.2 million beachfront condo in San Diego.
While they lack the employment income for a jumbo loan, their asset utilization lender sees opportunity. By showing 36 months of mortgage payments in assets, the couple can purchase their coastal retreat.
With 30% discounting on volatile assets, John and Michelle need $864,000 in retirement funds to qualify for the $5,000 monthly payment. Their seasoned $1.8 million retirement portfolio easily covers this.
The lender verifies their assets with account statements. John and Michelle put 20% down to reduce risk and interest rate when the LTV is over 80. With their assets and credit scores of 740 and 755 respectively, this retired couple is approved to buy their million-dollar Oceanview villa.
Foreign Nationals – No SSN Needed
For foreign nationals with money overseas, an asset utilization mortgage enables luxury home purchases without having to provide a Social Security Number or file U.S. tax returns.
Li Hua, a businesswoman from China, has accumulated $4.2 million USD in savings overseas from company profits and investments. She would like to purchase a $2 million home on the California coast in Pacifica as a second residence for when she visits America.
As a non-resident alien, Li Hua cannot provide income documents to qualify for a jumbo loan. But with an asset utilization mortgage, she can leverage her substantial assets.
Li Hua worked with Citi Private Bank to transfer and document $1.8 million of her overseas assets. This covers the 60-month mortgage payment requirement with 30% discounting on foreign funds. She also put down 35% to mitigate risk concerns for the lender.
With proof of assets and a credit letter from a VP at her bank, Li Hua is approved by the lender to purchase her luxury coastal home in the U.S. despite having no domestic income or social security number.
Pro Athletes – Smooth Retirement Planning
For professional athletes earning big but having short careers, asset utilization mortgages aid in smart retirement planning.
Devin, 32, has already played 10 seasons in the NFL as a wide receiver. He’s made $75 million in salary, with a high annual income but an uncertain future and is injured. Devin wants to invest $6 million into California luxury real estate as part of his retirement savings strategy.
With an asset utilization mortgage, Devin can leverage his substantial liquid assets from sports earnings without having to rely on providing traditional income documents like tax returns, paystubs, or W2 statements.
He worked with wealth management firm Morgan Stanley to document $5 million in approved assets, covering the 60-month requirement for mortgage payments on a $3.5 million property with views of the Pacific from the living room and mountain views from rooms facing east.
Devin also qualified by putting 50% down and keeping an exceptional 810 credit score. No wonder he was dancing in the end zone. By using his assets wisely, Devin secured a luxury residence to help fund his post-career lifestyle.
Devin was thinking of investing the other $2.5 million into a multi-unit rental property, duplex or triplex, to diversify income sources and position him and his family for equity and rental income growth.
Investors Can Turn Savings into Income
Savvy investors sitting on a million plus in investment brokerage accounts can use the value to acquire high-end real estate purchased with an asset utilization mortgage.
Jennifer, 42, has built up $1.3 million in her stock brokerage accounts through successful investing since she was 22. She has minimal W-2 wages, but high liquid assets and was in between jobs due to tech industry layoffs. Jennifer wants to purchase a $900,000 townhome and rent it out at $6,000 per month for passive income.
With her stock accounts alone, Jennifer can qualify for the mortgage by documenting 36 months of mortgage payments in assets. After the lender discounted her stocks by 30%, because she wasn’t 59.5 years old, she still surpassed the minimum assets threshold.
Jennifer also put down 25% and maintained a 740 FICO credit score. By leveraging her assets, she qualified to turn her stock account value into additional monthly income to qualify and buy the rental property.
Because she is buying the townhome to use as a rental property, she has another loan option with the non-QM DSCR mortgage. Ultimately, the asset utilization loan was the better option since the interest rate was .25% lower.
Conclusion: Luxury Possibilities for Niche Borrowers
Asset utilization mortgages open doors to luxury real estate ownership by considering assets over income. For retirees, foreigners, paid athletes, investors and other niche borrowers with substantial savings but limited W-2 wages, this loan unlocks jumbo mortgages.
Work with specialized non-QM lenders who understand alternative income documentation and risk management. Position yourself as an ideal borrower by having a seasoned down payment, high credit score, and high amount of liquid assets. With the right approach, a luxury property can be within your reach.