Details have been changed to protect client privacy, but the financial structure is accurate.
The Situation
A 52-year-old business owner — let’s call him David — had found his dream home in a coastal San Diego community. Purchase price: $2.8 million. David had built significant wealth over the years: a business valued in the eight figures, a $3.4 million investment portfolio, and a commercial real estate portfolio generating strong passive income. On paper, he was in excellent financial shape. Getting a mortgage should have been easy.
It wasn’t. David’s tax returns showed modest net income after business deductions. His portfolio income was inconsistent year-to-year. And his financial advisor — who had done excellent work managing his portfolio — was concerned about one specific risk: to put 20% down ($560,000), David would need to liquidate a meaningful portion of his investment portfolio. Given the embedded gains, that meant a potential six-figure tax bill and disrupting an allocation that had been carefully built over years.
The Strategy
We worked with David and his financial advisor together from the start. After reviewing his full financial picture — business income, investment portfolio, real estate cash flow, and balance sheet — we structured a solution built around two key elements:
- Asset-depletion income qualification: David’s $3.4M investment portfolio was used to calculate a qualifying monthly income stream under the lender’s asset-depletion methodology. Combined with his documented business income, this gave us a clean qualification without relying on W-2s or tax-return net income.
- Portfolio line of credit for down payment: Rather than liquidating portfolio assets, David used a pledged asset line (PAL) from his existing brokerage to fund the down payment. The assets stayed invested. There were no capital gains. His allocation remained intact.
The Result
David closed on his home in 38 days. His investment portfolio remained fully deployed. His financial advisor estimated the tax savings from avoiding the liquidation at approximately $140,000. The monthly mortgage payment was structured to fit comfortably within David’s cash flow from business distributions and rental income.
Six months later, David referred two colleagues from his industry group — both of whom had been told by conventional lenders they didn’t qualify for the homes they wanted. Both closed.
What This Illustrates
High-net-worth mortgage situations require a different kind of thinking. The right solution isn’t always the most obvious one, and it almost always benefits from coordination between the mortgage specialist and the client’s financial advisor. When that coordination happens well, clients get better outcomes — and advisors protect the relationships they’ve spent years building.
If you have a client with a complex mortgage situation, I’d welcome the conversation. Reach me at jeff@saxtonmortgage.com or (949) 344-1717.