What about a track record
To count capital gains activity for recurring cashflow many, if not most, financial institutions will want to see a track record. But not all.
A lesson learned from lenders to High Net Worth/High Income Clients
What if your borrower has a million-dollar portfolio? Does it really matter that s/he has not tapped it in the last few years? In fact, is it a plus that during the recession s/he did not have to tap it?
Here is the way some lenders look at a significant portfolio:
- Consider first discounting the portfolio value significantly, perhaps 30% to 50%.
- Assume a very conservative rate of return, perhaps 1% to 2%.
- Amortize potential liquidation of the portfolio value after discounting over 20 or 30 years.
- Include the potential yearly cashflow from portfolio liquidation in your cashflow calculation or as a quantifiable compensating factor.
Look to your financial institution's guidelines to decide what you can use and how. Often when your guidelines do not allow you to count an income source formally you can still use it in your write-up.
What less traditional sources of income are you using to qualify your borrower in this post-recession environment?