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Updated almost 4 years ago on . Most recent reply

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131
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Josh Calcanis
  • Rental Property Investor
  • Orlando, FL
62
Votes |
131
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Life Insurance as Financing?

Josh Calcanis
  • Rental Property Investor
  • Orlando, FL
Posted

BP,

I was speaking with a friend of mine who recently began working for a financial group. She mentioned that she had a few clients that had use their overfunded life insurance policy as financing for a deal. Basically, it's a conventional loan with a lender, but they use the policy as collateral.

She wasn't too familiar with the matter and was going to try to dig up some answers. To be fair, she just started and wants me to begin working through her (purchase life insurance).

I wanted to see if anyone on here is familiar with a strategy like this. What are the pros and cons to something like this? Is this even possible?

Most Popular Reply

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Thomas Rutkowski
#5 Personal Finance Contributor
  • Financial Advisor
  • Boynton Beach, FL
777
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811
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Thomas Rutkowski
#5 Personal Finance Contributor
  • Financial Advisor
  • Boynton Beach, FL
Replied

There is a dividend rate. You have selected to have the dividends be used to purchase paid up additions. That is the best way to do it. Can you send me the name of the carrier by msg?

You are right on track with your thinking. If you do what you state, then you will achieve an infinite ROI because there will not be any of your own money in that deal. You'll have done it with 100% OPM. Remember - Your cash value is still in the life insurance policy earning dividends. You made the down payment with the insurance company's money.

Even better is the fact that the policy loan is non-amortizing. All you should do is pay the 5% interest each year. You can keep your loan principal working without putting additional equity into it via amortization.

  • Thomas Rutkowski
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