Retiree With $1.6 Million Denied HELOC Because Lenders Count Documented Income, Not Assets
A 71-year-old with $1.6 million in retirement and brokerage accounts, a paid-off home, and good credit was rejected for a $100,000 home equity line of credit. The article says lenders focus on debt-to-income ratios based on documented income, which retirees living off savings may lack. It suggests asking lenders about asset depletion or setting up small recurring IRA withdrawals to create qualifying income, while noting tax and Medicare implications.
A 71-year-old applicant had $1.6 million in IRA and brokerage accounts, no mortgage, and strong credit, yet a $100,000 HELOC was refused. Underwriters compare monthly debt payments with income shown on tax returns and bank deposits, not net worth. Because required IRA distributions generally begin at 73, some retirees show little taxable income beyond Social Security and brokerage sales.
Asset depletion can help by dividing eligible portfolio balances over 360 months. The full $1.6 million would count as about $4,400 monthly; applying a 70% reduction yields roughly $3,100. Some lenders allow this for mortgages but not HELOCs, so borrowers may need to ask directly.
This story may affect older homeowners who hold wealth in retirement or brokerage accounts but lack steady paycheck income. Lenders’ reliance on income documentation could make home equity harder to access for some retirees, potentially limiting funds for repairs, medical costs, or emergencies. It may also push borrowers toward asset-depletion underwriting or small IRA withdrawals, which could add tax and Medicare premium considerations. Credit unions and private banks may see more inquiries from such applicants.