FAQ
Questions and answers
The Family Office Mortgage pairs a jumbo mortgage with an indexed universal life insurance policy, part of whose premiums a bank finances.
017 questions
The basics
What is The Family Office Mortgage?
The mortgage designed for people with high net worth. It is a privately offered program that pairs a jumbo home mortgage with a separately funded indexed universal life insurance policy, part of whose premiums a bank finances. You pay interest only on the mortgage for 15 years while the policy builds. From year 16, projected policy cash is designed to fund the mortgage payments, and to keep paying you after the loan is repaid.
Why not simply take a traditional mortgage?
A traditional mortgage was designed for buyers who must borrow as much as they can and repay it from a salary. It makes no use of capital. A household that can commit more on the first day has an advantage, and this structure is built to use it: the capital funds a policy that is designed to carry the mortgage later.
How much do I put in at closing?
About half the purchase price: 20% as the down payment and 30% into a separate policy. On a $4,000,000 home that is $2,000,000 at closing. The price of the home does not change. What changes is how it is paid for, and what your capital does afterward.
What happens after fifteen years?
The source of the payment is designed to change. The mortgage runs 30 years and is repaid at the end of year 30. From year 16, projected policy cash is designed to make the payments in place of your income.
Are you a lender?
No. The program is a strategy and a coordinating service. The mortgage comes from your lender or one we introduce, the policy from an insurance carrier, and the premium financing from a bank. Each makes its own decision and issues its own contract.
Is this a family office, or do I need one?
Neither. The name says who the structure is for: it is the home-buying structure a family office would use, opened to households that qualify. The program is not a family office and does not require one.
Is this a government program?
No. It is a privately offered program that coordinates an existing kind of mortgage and an existing insurance technique. No public agency sponsors or endorses it.
029 questions
The money
Why is the early payment lower?
Because it is interest only. In the reference case you pay $16,266.67 a month for 15 years, against $19,391.83 on a traditional loan. The principal is repaid in years 16 to 30, when projected policy cash is designed to make the payments.
What happens to the payment in year 16?
The scheduled payment becomes $27,176.61 a month, because the balance is then repaid over the remaining 15 years. Projected policy cash of $370,000 a year is designed to pay it, with margin above the $326,119 due.
How much less do I pay over the life of the loan?
In the reference case you put in $4,928,000 of your own money over 30 years, against $7,781,060 on a traditional mortgage. That is $2,853,060 less, because projected policy cash is designed to make the payments from year 16. After year 30, projected policy cash of $370,000 a year comes to you.
Do I get back what I put in?
On the projections, yes, and more. In the reference case you put in $4,928,000 in total. The policy is projected to make $4,891,789 of your mortgage payments, and then to pay you $12,498,211 between years 16 and 62. That is $7,570,211 more than you put in.
What does it cost?
The costs sit in three places: the lender’s rate and fees on the mortgage, the carrier’s charges inside the policy, and the bank’s interest on the premium financing. Each is itemized in its own documents, and you and your advisors see every one, with how each party is paid, before you commit.
What does the bank’s money do?
It pays insurance premiums to the carrier, which allows a larger policy than your contribution alone would fund. It is not a line of credit. The policy it helps to build is what is designed to carry the mortgage later.
Who is the lender, and what rate would I pay?
Your own lender, or one we introduce. The lender is identified for each case, and its term sheet sets the actual rate and terms. The 6.1% in our examples is an assumption applied to both sides of the comparison. It is not a rate offer.
Can I pay the mortgage off early?
Yes, on your lender’s prepayment terms. The mortgage and the policy are separate contracts, so repaying one leaves the other in place.
Does the comparison assume I invest the money I keep?
No. Neither side assumes any return on money kept or saved, so the comparison does not depend on how your other capital performs.
039 questions
The policy
What kind of policy is it?
An indexed universal life insurance policy: permanent life insurance with a cash value. The carrier credits interest to that value by a formula linked to a market index, within a cap and a floor.
Who is the insurance carrier?
The carrier is identified for each case, together with its product and its illustration for the person to be insured. No carrier is named on this site, and none sponsors or endorses the program.
How dependable is the projected policy cash?
It is a projection, and it is managed as one. Each case is modeled on a conservative profile, the plan is built with margin above the mortgage payment, and the policy is reviewed against its plan every year. The $370,000 a year in the reference case is an illustration; your own carrier illustration sets the figures for the person insured.
Where does the policy cash come from?
From the policy itself, through policy loans or withdrawals against its value. That is how cash is taken from a life insurance policy without surrendering it. Tax treatment depends on the case, and your CPA confirms it for your design.
How long is the policy cash projected to last?
In the reference case, for 47 years: from year 16 through year 62. That is the illustrated period.
Who is insured?
You, a spouse or an adult child, as the carrier accepts and the design suits. The insured goes through the carrier’s medical underwriting. The insured, the owner of the policy and its beneficiary are three roles, and they can be three different people.
Is my money in the stock market?
No. An indexed policy does not own the index or the shares in it. The index is used only to calculate the interest credited, within the policy’s cap and floor, so a falling market does not produce a negative credit.
Can I use the policy cash for something else?
While the mortgage is outstanding, the design directs policy cash to the mortgage. After the mortgage is repaid at the end of year 30, projected policy cash is available for other purposes.
047 questions
How risk is managed
How are the risks managed?
By our team, in every transaction. Each case is underwritten as a whole, modeled on a conservative profile across many market paths, built with margin and reviewed every year after closing. Our team has structured hundreds of transactions.
What if the policy provides less cash than projected?
The plan is built with margin for that. In the reference case the later payments need $326,119 a year and projected policy cash is $370,000, a margin of $43,881 a year. Policy cash could come in 10% lower, at $333,000, and still pay the mortgage in full. The annual review keeps the policy on its plan.
What happens if rates rise?
Three rates matter: the mortgage rate, set by your lender’s terms; the bank’s rate on the premium-finance loan; and the rate on policy loans. The financing is sized on a conservative profile, its terms are agreed before closing, and the bank’s loan has a planned exit around year 15.
What about the bank loan behind the policy?
It funds premiums, it is secured by the policy, and it has a planned exit around year 15. Its term and collateral are agreed before closing. Where further collateral is called for, assets you already hold can be pledged rather than sold.
Who looks after the policy once it is in place?
We do. Policy values, the bank loan and the collateral are reviewed against the plan every year, so the policy stays funded and on course and adjustments are made early.
What if I sell the home?
The sale repays the mortgage. The policy is a separate contract and does not end with the sale, so it can stay in place. What suits you at that point is worked through with our team and your advisors.
How is the policy cash taxed?
Life insurance has long-established tax treatment: death proceeds are generally excluded from federal income, and policy loans are generally not treated as income. The policy is designed and funded within the limits that preserve that treatment. We do not give tax advice, and your CPA confirms each point for your design.
056 questions
Eligibility and process
Who qualifies?
Households with $5,000,000 or more in assets apart from the home, income of $500,000 or more, and capital for about half the purchase price. The plan also needs a long horizon, an insurable person and mortgage approval. The criteria are published in full on the eligibility page.
Why are the thresholds where they are?
Because the structure is built on capital. On a $4,000,000 home the program commits $2,000,000 at closing and carries an interest-only payment of $16,266.67 a month for 15 years. Households at these levels do both comfortably.
What happens after I see if I qualify?
Your request goes to one person, Kent Chesley. He reviews whether the program fits, and a comparison is prepared for your home: what you would commit, what you would pay in each phase, and what the policy is projected to provide.
How long does it take?
It depends on underwriting. A lender, an insurance carrier and a bank each make their own decision. We keep all three moving together, and if you are working to a closing date, tell us at the first call.
Do I need to send medical or financial records to start?
No. The first step asks for ranges, not statements, and for no medical or account details. Medical information goes to the carrier through its own process, and only if you proceed to underwriting.
Should I involve my CPA and my attorney?
Yes, and early. We welcome it. The structure has tax, estate and lending aspects that depend on your situation, and there is a technical brief on this site written for your advisors. We do not give tax or legal advice.
065 questions
Family and estate
Can my family inherit it?
Yes. Three things can pass to your family: the home, the capital you kept, and the policy’s net death benefit, which is the death benefit after policy loans and any lender’s claim. When the insured dies, the policy pays that benefit in place of the annual cash.
What happens if the insured dies early?
The policy pays its net death benefit to the beneficiary. That is what life insurance is for: the family receives a lump sum at the moment the annual cash would stop. The proposal for your purchase sets out the net death benefit year by year.
How much is the death benefit?
The reference case quotes a remaining death benefit of about $2,600,000 at the end of the illustrated period. Your own carrier illustration sets the figure for the person insured, year by year.
Who owns the policy?
You, your spouse or a trust. The owner controls the policy and names the beneficiary. Ownership affects estate tax, what the lenders require and who can direct the cash, so it is settled with your attorney during the design.
What if I die and someone else is the insured?
The policy continues, because the insured is living. Who then controls it depends on the ownership and trust arrangements, which is why a successor owner belongs in the design.
By qualification
Find out if it is open to you.
Three ranges tell you where you stand against the published criteria. If you meet them, Kent Chesley will speak with you personally.
Prefer to talk? Call him directly at 949-293-8686.