Can You Use Life Insurance While Alive To Buy A House?
If you have a permanent life insurance policy, you can use it to buy a house. Permanent life insurance policies accumulate a cash value over time, and you can borrow against this value to finance your home purchase. Borrowing against your life insurance policy can make it easier to get approved for a mortgage, and it can also help cover your down payment and closing costs.
Types of Life Insurance Policies That Can Be Used to Buy a House
|Type of Life Insurance Policy||Description|
|Permanent Life Insurance||Covers you for your entire life and accumulates a cash value over time that you can borrow against.|
|Universal Life Insurance||Allows you to put extra money toward the policy to increase the cash value.|
|Variable Life Insurance||The cash value fluctuates with the market.|
|Term Life Insurance||Cannot be borrowed against because it does not accumulate a cash value.|
How Borrowing Against Your Life Insurance Policy Can Help You Buy a House
Borrowing against your life insurance policy can make it easier to get approved for a mortgage because the policy is considered a liquid asset. If you fall behind on your mortgage payments, you can borrow against your policy to get current with your lender. This safety net gives lenders more confidence in you and may result in lower interest rates.
Borrowing against your life insurance policy can also help cover your down payment and closing costs. A higher down payment can mean lower interest rates, a more affordable monthly mortgage payment, and more loan options.
If you decide to borrow against your life insurance policy to buy a house, it’s important to consult with your insurance agent or financial advisor to understand the risks and costs involved. Interest on the loan will accrue, and if you don’t pay it back, you risk losing your policy. Some policies may also have restrictions on what the money can be used for, so speak with your insurance agent to clarify the details.
In summary, a permanent life insurance policy can help you buy a house, but it’s important to weigh the risks and costs and consult with professionals before making any decisions.