Home
Back
Asset Based Mortgage Formula:
| From: | To: |
Asset based mortgage calculation determines the maximum loan amount a lender might offer based on the value of the borrower's assets and the loan-to-value ratio. This approach is commonly used in asset-based lending where the loan is secured by collateral.
The calculator uses the asset based mortgage formula:
Where:
Explanation: The formula calculates the maximum loan amount by multiplying the asset value by the lender's acceptable loan-to-value ratio.
Details: Asset based lending provides borrowers with access to capital based on the value of their assets rather than solely on income or credit history. It's particularly useful for businesses and individuals with significant assets but irregular income streams.
Tips: Enter the total value of your assets in dollars and the loan-to-value ratio as a decimal (e.g., 0.8 for 80%). Both values must be positive, with LTV typically between 0.5-0.9.
Q1: What types of assets can be used for asset based lending?
A: Common assets include real estate, equipment, inventory, accounts receivable, and marketable securities. The acceptability of assets varies by lender.
Q2: How is LTV determined?
A: LTV ratios are set by lenders based on the type of asset, its liquidity, market conditions, and risk assessment. More liquid assets typically command higher LTV ratios.
Q3: Are there other factors that affect loan approval?
A: Yes, lenders also consider credit history, income stability, debt-to-income ratio, and the purpose of the loan, even in asset-based lending.
Q4: What are typical LTV ratios for different assets?
A: Real estate often has LTVs of 70-80%, equipment 50-60%, accounts receivable 70-85%, and inventory 30-50%, depending on the lender's policies.
Q5: Is asset based lending only for businesses?
A: While commonly used by businesses, individuals can also access asset-based loans, particularly for high-value assets like real estate or investment portfolios.