Risk management
We know the risks. Managing them is the work.
A mortgage paired with a financed life insurance policy has moving parts, and each one has to be set correctly. Our team has structured hundreds of transactions. Every one is underwritten, built with margin and managed after closing, so that you are protected.
The team
Why this team
What protects you is how the mortgage, the policy and the bank loan are sized against each other, which terms are accepted, and who is watching after closing. We underwrite each transaction ourselves, decide how much financing the policy should carry, and stay with the plan. That is why the program is offered by this team.
How you are protected
Six safeguards
- 01
Underwritten before it is offered.
We underwrite each transaction as a whole (the purchase, the policy design and the financing) before anything is proposed to you. The lender, the carrier and the bank then make their own decisions.
- 02
Modeled on a conservative profile.
Every case is run through simulations across many market paths before you see a number. The amount of financing behind the policy is set by that work.
- 03
Built with margin.
The plan is not drawn to the dollar. In the reference case, projected policy cash of $370,000 a year stands against $326,119 of mortgage payments, which leaves $43,881 a year to spare.
- 04
Reviewed every year.
After closing, policy values, the bank loan and the collateral are checked against the plan each year. Adjustments are made early, while they are small.
- 05
A planned exit for the bank.
The bank that finances part of the premiums is not a permanent partner. Its loan is planned to be repaid from policy value around year 15, before the policy is asked to pay the mortgage.
- 06
Open to your advisors.
Your CPA and your attorney receive the full proposal, the illustration and the financing terms, before you sign anything.
The numbers
Built with margin
- projected policy cash, a year
- $370,000From year 16, in the reference case.
- mortgage payments, a year
- $326,119Years 16 to 30, at an assumed 6.1%.
- margin, every year
- $43,881Projected policy cash above the mortgage payment.
- with policy cash 10% lower
- Still paid in full$333,000 a year still covers the $326,119 due.
Reference case: a $4,000,000 home, 20% down, an assumed 6.1% mortgage rate. Policy cash is projected. Your proposal shows the same figures for your purchase.
What we manage
How each risk is handled
- How the policy performs
- The policy is credited by a formula with a floor beneath it, so a falling market does not produce a negative credit. We design to conservative crediting, hold margin above the mortgage payment, and review the policy against its plan every year.
- What borrowing costs
- The bank’s rate is set by its loan agreement. The financing is sized on a conservative profile, its terms are agreed before closing, and the bank’s exit is planned rather than left open-ended.
- Collateral
- The bank’s loan is secured by the policy. Where further collateral is called for, assets you already hold can be pledged rather than sold, and they are released as policy value builds.
- The payment from year 16
- From year 16 the scheduled payment is designed to be met from projected policy cash, with $43,881 a year of margin in the reference case.
- Changes in your life
- The mortgage and the policy are separate contracts, which is a strength: the home can be sold and the policy kept. Ownership, beneficiaries and what happens at each stage are settled with your attorney before closing.
- Tax treatment
- The policy is designed and funded within the limits that preserve the tax treatment of life insurance. Your own CPA confirms the design for your situation.
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.