Sometimes the best way to describe what it is that I do on a regular basis is that I read contracts. I read small print, and the small print sometimes tells the tale. My very own bank (or I should say one of the banks that I deal with because I don't want them all to know all of the cards in my deck), One of the banks I deal with sent me an email recently. The email was about hurrying up because of a limited-time offer that they had for fall fix-up days that were going to be ending soon and to complete your application by November 23rd, they are offering a promotional rate for the first 12 months of a 3.99% for a HELOC, that's a home equity loan, then at 7% after the first 12 months and then a little asterisk* after it. That’s when I got into the small print.
Now the reason I’m going to go over the small print is that I want you to know how banks work regarding their loans, and I want to give you a different option. A different option that would allow you more flexibility, more opportunity, and much better terms.
Let’s take a look at the very small print:
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Bank’s Small Print: |
Translation: |
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Subject to credit approval |
Okay, so, you might not even be able to get this loan. |
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It is a limited-time offer available to qualified borrowers |
You got to be qualified. |
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You also have to have an owner-occupied single-family resident located in Wisconsin or Minnesota. |
So, that means you already have to have probably a mortgage or at least you have to have a house because that's what they're going to use as their collateral rates. |
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For up to 80% of the loan to value |
Simple math: $100,000 house means you can only get $80,000 and that's if your house is paid off, free and clear, but only 80% of what the equity would be. |
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After the promotional period, the rate would become variable, subject to change on a monthly basis. It's going to be based on the prime rate |
That's the one that moves quite aggressively as published by The Wall Street Journal. |
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It has a floor of 4%. |
You can never be charged < 4% for a rate. |
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As of November 9, 2022, the Wall Street Journal published the prime rate at 7%. The maximum annual percentage rate is going to be 18%. |
Wait a minute. This sounds like a credit card to me, possibly. |
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The promotional rate is available only on new HELOC home equity loans, only of $5,000. |
Wait a minute. So, if I have a paid off $100,000 house and I can get 80% of the money, isn't that $80,000? Now you're saying I can only get $5000? |
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or more on existing lines with an increase of $5,000. |
Okay, so they will do it if you’re making an increase of at least $5,000 on an existing loan. |
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Proof of homeowners insurance is required. |
Well of course because they want to make certain that their asset, which used to be your asset, but now it's theirs is covered in case the thing burns to the ground. |
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You are responsible for fees from third parties, generally ranging from $323.70 to $1,865.65. |
Wait, on a $5,000 loan there’s that much in closing costs. |
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In addition, Minnesota residents are subject to a mortgage registration tax, $2.30 per $1,000 borrowed. |
What, to be able to get my own money? |
Can I talk a little bit now about how my own, personal, permanent, whole life insurance policy works:
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Bank’s Fine Print |
Permanent, Whole Life Insurance Policy |
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Subject to credit approval |
No, the fact that I have the asset is the only credit approval that I need. I don’t have to pay for additional credit approval. |
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Limited-time offer |
No. It’s available to me any single business day of the year. If I've been funneling (adding) money into my permanent whole life insurance policy, there is money already there. It can be retrieved. It can be used for me whenever I dictate. |
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Qualified Borrowers |
The day I bought the policy is the day that I was qualified, never to be taken away.
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you also have to have an owner-occupied single-family resident |
I don't have to have a single-family residence. I just have to have the policy.
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located in Wisconsin or Minnesota |
It doesn't have to be located in Wisconsin or Minnesota. I can do this any place in the 50 states of the United States of America.
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Available, according to the HELOC loan, would be 80% loan: value. |
Okay, with a whole life insurance policy, let's say there's a $100,000 in cash there. Except for the amount of my next annual premium, just to make certain that the policy continues to the next year, I can get virtually all of my money out. So, if my annual premium is $2,000, that means I should be able to get $98,000 cash out.
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After the promotional period |
There is no promotional period. |
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After the promotional period, the rate would become variable subject to change on a monthly basis based on the prime rate. |
The rate is variable with a whole life insurance policy. Most companies will give you an interest rate year to year, but it's not based on the Prime rate, which can be all over the place. It's based on a long-term bond rate. So, here's an example: I just had a policy that was up for its’ annual renewal and it went from 4.76% to 5.21%. I actually have a couple different policies at different rates, this one went from the 4.76% to the 5.21%. It stays that way for an entire year. It doesn't change for the entire year. When the new year begins at the start of my next annual renewal, it does change for the entire year, and it doesn't have these huge swings like you would see with a prime rate.
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Late Payment Fees |
Unlike the bank, if I should decide that I don't want to pay my premiums for I don't know a month or two because maybe I can't or I won't or I've got a better use for my money, I can actually bypass that without any penalties whatsoever. How would that play out with your bank? Probably not that well |
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you are responsible for fees from third parties generally ranging from $323.70 to $1,865.65. In addition, Minnesota residents are subject to a mortgage registration tax, $2.30 per $1,000 borrowed |
What is this? Mortgage registration tax and then fees? You know there's no fee to be able to use and borrow against my own life insurance policy. By the way, when I borrow against a life insurance policy that I own, not only do I receive the money from the insurance company, because they're taking money out of their general fund and then charging me a realistic interest rate based on long-term interest rate, my money actually remains inside the policy doing all the wonderful things that it always has done and always will do. |
So, here's the question: are you tired of having the bank dictate how you handle your money and what the terms are and if you qualify and what kind of fees and taxes that you might have to pay? Would you like to create a concept where perhaps you can act as if you are the bank yourself? Again, maybe you might take money out of your home with an equity loan because you want to go on a vacation. That's not what a life insurance policy should be for. I sometimes will sum it up this way: I see people taking out personal loans to go to Disney World. The money inside your policy should be so you can buy Disney Stock. The idea is to take money to create more money, to be able to build your Castle, build your Empire. So, if you are like me and you read small print, and you believe that there is a better way, and I believe that there is a better way, purchase my book or even better yet learn how to do this from myself and from my team. Explore our website www.investmentsdonghug.com. Let’s connect and make you the banker of your life.
