Infinite banking (HELOC + Life insurance)

[Amon Neequaye]

Hey all, what might the potential downsides be if I use my cash value life insurance as well as a HELOC on an existing rental property to create a form of infinite banking for additional properties? I'm new to HELOCs so I'm trying to find any pitfalls I haven't seen yet.

Any upsides are welcomed as well of course! Thanks!!

[Lane Kawaoka]

HELOC and IBC banking strategies is like having two different credit cards with varying cash back rates, depending on the category you're playing in the credit card hacking game.

In the past, HELOC had a lower rate, while infinite banking usually pegged around five to five and a half percent for borrowing. However, recently HELOCs have become more expensive, sitting at around 7%. But don't worry, some banks offer great teaser rates, especially here in Hawaii, which can get you under 5% for a limited time.

Both HELOC and IBC are fantastic sources of lazy equity that can be turned into 10-15% more through value add deals and other real estate opportunities. That's what we're aiming for, right?

Personally, I use both HELOC and banking. However, I've moved beyond relying solely on a HELOC. Once you reach a certain point, it's better to either refinance the house if you plan to stay long-term or sell it and venture into more real estate and investments, rather than owning the house you live in.

The great thing about a HELOC is that there are no fees involved, unlike refinancing, where hidden fees can catch you off guard. However, one downside is that when the economy takes a little dip, banks can retract those HELOC. This is the upside to the IBC policy loans.