At the beginning of the 2013-1014 winter season, the name “Polar Vortex” sounded to me like some warp zone found in “Super Mario Brothers.” Honestly, I thought the weather reporters sounded a little too dramatic. That is, until I spent countless hours stuck in airports and on freeways bundled up in four layers of clothing. This “Polar Vortex” quickly became my nemesis.
With the cold snap, millions of homeowners and landlords also felt the pain financially as broken pipes, burnt out furnaces, and damaged foundations and roofs needed repairs. In a study by the Joint Center for Housing Studies at Harvard University, approximately $300 billion was spent on home remodeling and maintenance in the United States last year.*
However, with or without the polar vortex, there will always come a time for repairs and upgrades on any home. So, how do you prepare financially for these home issues without tying up a bunch of excess emergency cash in the bank? Or without financing the repairs on a high rate credit card? The answer is the Infinite Banking Concept.
This unique banking system gives you a way to have a tax-free growth every year on your emergency repair money, while still using that cash value for your home repairs.
Paradigm Life will provide you the education and tools you need to utilize a dividend-paying whole life insurance contract to run these finances on your home repairs.
Assume, for example, that you have a $5,000 repair on the HVAC system in your home. Without any credit check, background check, debt/income check, or any other kind of check, the insurance company will allow you to take a flexible loan against your whole life insurance policy. Please note that this loan is flexible, meaning you set the terms of pay-back. You can pay back the loan immediately, over time, or years down the road. Essentially, you determine when and how you are going to pay it back. The insurance company, however, will charge a small interest percentage on the loan as a way to recuperate the opportunity cost lost by loaning the money to you. Now take look at how the numbers work.
In our example, we are going to assume that you set the terms to pay back the loan over a 60-month period (five years) at a 5% interest rate to the life insurance company. The monthly payments will be $95/month to principal and interest. After five years, the total interest charged will be $661.
This is really where the Infinite Banking System starts to work. The $5,000 that you borrowed against your whole life insurance never left the policy. The entire $5,000 remained as cash value in the policy and continued to grow over time at, let’s say, 5%. So, at the end of the 5-year period, that tax-free growth just increased the value in your policy to $6,381 or an earnings of $1,381.
Even though you had to pay $661 in interest to the insurance company, the profits realized in the cash value of your policy was the $1,381. This is a difference of $720.
In other words, in this scenario, if you financed your home repairs from your own banking system, you would be $720 better off than by writing a check from your emergency checking account at the local bank.
Before the overly dramatic weather man/weather woman predicts a polar vortex, consider investing in some extra sweaters, wool socks, and the Infinite Banking Concept.