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Asset Based Loans
Asset-based loans, also known as asset utilization loans, leverage assets as a source of income. Whether you're a retiree with a modest fixed income, a burgeoning startup, or an established business seeking to optimize cash flow, the accessibility and advantages of asset-based loans and mortgages have made them increasingly popular among borrowers. Fyzl Group adopts a pragmatic approach to underwriting asset-based loans, ensuring a straightforward application process.
In an asset-based loan arrangement, borrowers secure financing based on their existing assets. This approach, often termed as asset depletion loans, empowers borrowers to access cash by leveraging their investments.
Asset utilization loans cater to retirees, investors, and self-employed individuals who possess tangible assets.
How It Works
In this lending model, you leverage your assets to secure a loan. The loan amount, referred to as the borrowing base, is determined based on a percentage of the value of your assets.
For an asset-based mortgage, you may utilize 70% of your retirement and investment accounts and 100% of your liquid assets, such as the value of your bank accounts.
The lender will establish the borrowing base and the terms of the loan.
Determining Your Asset-Based Loan Eligibility
To calculate the qualifying amount for your asset-based loan, start by establishing your maximum monthly loan payment. First, ascertain the total value of your available assets. Next, divide this total by either a 5-year, 7-year, or 10-year term, depending on the specific asset-based loan program.
For instance, if you possess $600,000 in liquid verifiable assets and your total mortgage payment amounts to $10,000 per month, you have sufficient assets to cover 60 months' worth of payments, thereby meeting the ability-to-repay criteria.
What Assets Qualify for a Loan?
Liquid assets such as checking accounts, savings accounts, certificates of deposit (CDs), money market accounts, mutual funds, stocks, and bonds serve as collateral for loans. High-net-worth individuals may use asset statements alone for qualification in certain cases.
Crucially, the assets offered for the loan must be easily convertible into cash.
For retirees, assets eligible to be considered as income include bank accounts (checking or savings), CDs (certificates of deposit), investment accounts (stocks, bonds, and mutual funds), and money market accounts.
Asset Based Loan Eligibility Criteria
Qualified based on verified liquid assets
Loan amounts up to $3 million
Minimum 620 credit score required
No employment or income verification necessary (Ability-to-Repay (ATR) is determined by assets and may be used in combination with bank statements in some cases if assets alone do not suffice)
No tax return or 4506T required
Debt to Income (DTI) Ratio not calculated (in most cases)
Interest Only option available
Down payment as low as 20%
Cash-out permitted
Advantages of Asset-Based Financing
Like any borrowing arrangement, asset-based loans come with both advantages and disadvantages.
One key advantage of asset-based loans or mortgages is the ability to leverage existing assets, regardless of your current financial circumstances. This means that your current income level does not influence loan approval. Asset-based mortgages cater to homebuyers and homeowners with substantial verifiable assets, offering an alternative path to loan qualification.
Unlike a reverse mortgage, asset-based loans permit you to apply for financing on a second home that is not your primary residence. Although asset-based loans typically entail higher interest rates, Fyzl Group provides access to wholesale asset-based mortgage rates, ensuring the most favorable loan terms.
Business owners can also utilize asset-based cash-out refinancing home loans to fund their businesses.
Obtaining an Asset Based Loan
To secure an asset-based loan or mortgage, you must initiate the application process with a lender. During the application, you'll need to specify the assets you intend to utilize for qualification and provide any requested documentation. Following an initial assessment of your application, if the lender deems you a suitable candidate for an asset-based mortgage, they will offer you a preview offer and request a preliminary commitment before conducting a thorough review of your assets. Upon completion of the comprehensive audit of your assets, you'll receive final approval and funding for your loan.
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