Originally Posted by annuityseller
I'll third anything that would make me money.you could use the current amortization and a seperate life Illustration?? A EIUL would be the best candidate??
I think the EIUL is the best candidate. Keep in mind the only way it could work it to max fund it. So let's say you write the EIUL for the face amount to pay off the mortgage, say 300k. Maybe the target premium is $240 a month, but you can put a total maximum of $400 a month into it without violating the guidelines to turn it into a MEC. So that's an extra $160 a month funding it, which means there will be cash value in year 1. I haven't run a proposal on one in a couple years but I would assume that using max funding the cash value should equal the mortgage payoff somewhere around the 20 year point on a 30 year mortgage. At this point the client could pull the cash value out, pay off the house and surrender the mortgage. It will not work at just target premium though. If the client can't max fund it then you're better off just going with term and letting them pay the mortgage down early another way.
The benefits are the client still writes off the mortgage interest in full for 20 years. If they simply add that extra $160 to the mortgage each month it would have reduced their interest write off. While at the same time the cash growing in max funded EIUL is growing tax deferred. If the client does lose their job they could borrow on the policy to pay their mortgage unlike if they just paid it down by sending in extra money. Of course when they surrender the policy there will be a tax gain, but all the premiums can be used as part of the cost basis. The risks would be if the EIUL doesn't perform as well as expected.
A whole life policy wouldn't work because it's a set amount and you can't contribute enough excess premiums to it and the cash value wouldn't accumulate as quickly. A 20 pay whole life would be interesting to run, but still with the lower interest rate probably wouldn't fair as well. The same on a regular UL. I don't think it would fair as well because of the lower interest rate. A VUL has the market risk and that's one thing we're trying to avoid. An EIA wouldn't work as well because it still leaves the owner unprotected in case of death and the tax penalties if the client is under 59 1/2 when they cash out. I would also think this would only work well on a newer, within the first year or two of a brand new 30 year mortgage.
Definately not for every client and it's a lot harder to explain. Again only good for new mortage clients who are series about a mortgage reduction strategy. I haven't done the research lately and not every EIUL would work as well as others. One would have to do a lot of research or play around on WINFLEX to find the best one for the situation. But it does give another option for some clients.