Mortgage Killer Accelerator

Strategy 7 of 107

Mutual Pay and Borrow Company policy loan from account value

Depends on markets or variable ratesFrom borrowing against another asset (moves the debt, does not erase it)

What it is

Only with a permanent policy you already own and have funded for years.

Steps

  1. Only with a permanent policy you already own and have funded for years.
  2. Borrow from the policy against its account value and pay mortgage principal (a policy loan, never a withdrawal).
  3. Repay the policy loan from assets or new cash flow on your own schedule. While a loan is outstanding the IUL credit used here is the rate minus 5 points, never below 0, on account value (SO-06).

Repeat: When the policy's surrender value and the loan's cost make sense; review every year.

Measure: Loan balance against surrender value each year; months to mortgage payoff.

Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Loan interest accrues; an unpaid loan reduces what the policy pays your heirs.
  • If the policy lapses with a loan, the gain can be taxed all at once.

Who it fits

Higher earners, Higher net worth, with assets, Business owners, Married couples, Grandmas and grandpas (62 and over)

Needs

Owns a policy with account value

How predictable

Depends on markets or variable rates

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (higher earners). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: only with a permanent policy you already own and have funded for years.

Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Asset-rich cycle: Move an asset into principal and recast. Only borrow against an asset when its cost and risk are clearly lower than the mortgage's.

Sources and more information

Where to get help

Related strategies

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