The 1% Portfolio Rule: Calculating Liquidity for Scaled Investors

Rule

In addition to subject property reserves, Lendency requires "Portfolio Reserves" equal to 1% of the total Unpaid Principal Balance (UPB) of all mortgages currently reported on your personal credit report. This includes the mortgage on your primary residence, second homes, and other investment properties.

Lendency Insight

This rule ensures that as you scale, your global debt-to-liquid-asset ratio remains healthy. By looking at all mortgages on your credit report, we account for your entire monthly debt obligation. If you have $2,000,000 in total mortgage debt across your primary home and four rentals, you would need $20,000 in portfolio reserves. This "macro-cushion" ensures that a financial setback in your personal life or another property won't compromise payments on the proposed new loan.

Common Scenarios & FAQs

• Which accounts can I use to show this liquidity? We accept a wide range of accounts, including:

  • Personal Checking, Savings, and Money Market accounts

  • Certificates of Deposit (CDs)

  • Publicly traded Stocks, Bonds, and Mutual Funds

  • Vested Retirement accounts (valued at 50%)

  • The Cash Surrender Value of a Life Insurance policy

• What if I own a property free and clear? If there is no mortgage reported on your credit for a specific property, it does not contribute to the 1% UPB calculation.

Key Definitions

• UPB (Unpaid Principal Balance): The total amount of principal remaining on a loan, as reported by the servicer to the credit bureaus.

• Cash Surrender Value: The sum of money an insurance company pays to the policyholder or an annuity holder upon cancellation of the policy.