You mean turning your home equity into an investment.   If you don't get any decent answers on this board, PM me and I'll direct you to where you can get info.

Personally, I think that it is a very dangerous strategy with limited upside potential and tons of downside risk.

Is this just a variation on the whole “infinite banking” bs?

This stuff is a joke.

In a nutshell-they recommend that you take out the largest home mortgage you can so that you have more money to “invest”.  Then they suggest you “invest” your money into “investment grade” Universal Life contracts, pushing them because when you take money out in the future it’s tax favored.

Problem is, in the interim the returns on the UL policies are pretty crappy.  Too, remember that with UL neither the costs nor the returns are guaranteed.  They recommend you withdraw the money via tax-free policy loans.  What they don’t tell you is that if you inadvertanly lapse one of these policies the tax consequences could be financially disastrous.

Either these guys are too stupid to understand the long term implications of what they recommend, or they simply don’t care that they are peddling poison on unsophisitcated investors.

The only ones who win are the insurance salesmen who get big fat comissions on these “investment grade” contracts.

My guess is that the people peddling this stuff, think that it's a good idea, thus they are stupid and not unethical.  The problem is that if you backtest this strategy, it would have a couple decade history of being a viable strategy.  

Basically, the strategy will work great if interest rates are following a generally downward trend.  The strategy blows if interest rates are rising.  The problem is that the interest in an adjustable rate mortgage changes much more quickly than the interest on a UL policy because the UL policy is based upon the portfolio rate of return of the insurance company and not the prevailing rates.

[quote=anonymous]

My guess is that the people peddling this stuff, think that it’s a good idea, thus they are stupid and not unethical.  The problem is that if you backtest this strategy, it would have a couple decade history of being a viable strategy.  

Basically, the strategy will work great if interest rates are following a generally downward trend.  The strategy blows if interest rates are rising.  The problem is that the interest in an adjustable rate mortgage changes much more quickly than the interest on a UL policy because the UL policy is based upon the portfolio rate of return of the insurance company and not the prevailing rates.

Joe, you are certainly correct.  This brings up another point why I prefer whole life over universal life.  With both WL and UL, worse than expected mortality will negatively impact the policy.  Better than expected mortality will cause increased performance of a WL policy, but will have no positive effect on a UL policy.

[quote=anonymous]Joe, you are certainly correct.  This brings up another point why I prefer whole life over universal life.  With both WL and UL, worse than expected mortality will negatively impact the policy.  Better than expected mortality will cause increased performance of a WL policy, but will have no positive effect on a UL policy.[/quote]

Doesn’t it depend upon what you’re trying to accomplish?  Seems to me if you keep up with no-lapse minimums UL-G is less expensive, though it accumulates little cash.

Joe, I should have included no lapse UL in my answer.  Actual mortality expense, either for the better or for the worse, has virtually no impact on a no-lapse minimum UL (GUL).  It can negatively effect UL and VUL.  It can positively or negatively effect WL.