Sorry, but I disagree. Don't forget...they just lost liquidity. What if they needed the cash? Do you think the agent would loan them cash from the commission he received?
-
Do you have any victories you'd like to share for the month of May? Help us celebrate others by posting here.
Reverse Mortgage to Pay Premium on SPWL
- Thread starter ScottLFB
- Start date
Sorry, but I disagree. Don't forget...they just lost liquidity. What if they needed the cash? Do you think the agent would loan them cash from the commission he received?
- 2,024
In the case of a SPWL they could take loans back against the policy if necessary and did not lose liquidity.
I think the agent should disclose the exact situation if someone wanted to do something like this.
You're saying a concept is bad because some people might use it unethically, but the concept does have situational merit, however there are very few circumstances where it would really be a suitable option, and there is a financial incentive to make it appear suitable when it is not.
I can give you an example. You have 2 70+ year olds, who have a high net worth, sitting on a home worth $300,000, yet none of the kids want to live there after they have passed.
The home can be reversed, and a medically UW UL can be purchased with proceeds optimally on the husband. They continue to live in the house, and at death the funds pass without need to sell the home.
Conceptually, that is fine, if the person has been fully educated as to the exact outcome, and the desired outcome is acceptable to all parties.
Reduction in liquidity temporarily is not necessarily a bad thing if you increase net value.
I'm not saying the concept is right for everyone, or even for a lot of people, but it can be done ethically, it just happens to be something that can be done on people for very wrong reasons, commission being one of them.
If you sell insurance with the sole intention of earning the highest commissions possible, you're doing it wrong.
I think the agent should disclose the exact situation if someone wanted to do something like this.
You're saying a concept is bad because some people might use it unethically, but the concept does have situational merit, however there are very few circumstances where it would really be a suitable option, and there is a financial incentive to make it appear suitable when it is not.
I can give you an example. You have 2 70+ year olds, who have a high net worth, sitting on a home worth $300,000, yet none of the kids want to live there after they have passed.
The home can be reversed, and a medically UW UL can be purchased with proceeds optimally on the husband. They continue to live in the house, and at death the funds pass without need to sell the home.
Conceptually, that is fine, if the person has been fully educated as to the exact outcome, and the desired outcome is acceptable to all parties.
Reduction in liquidity temporarily is not necessarily a bad thing if you increase net value.
I'm not saying the concept is right for everyone, or even for a lot of people, but it can be done ethically, it just happens to be something that can be done on people for very wrong reasons, commission being one of them.
If you sell insurance with the sole intention of earning the highest commissions possible, you're doing it wrong.
- 15,041
Borrow from the life policy. Remember, this is a SPWL, there will be cash value. That life policy is probably vastly more liquid than the house.
But when you start borrowing from the cash value, you defeat the reason for doing this in the first place....
Which means....
The market for a transaction like this is people who are affluent enough to care with high enough equity in their home to make it work, have the cash reserves / alternate income, where they don't need the home equity to live, and have not put a life policy in place already.
Seems like a pretty small (but profitable) niche market to me. The potential for abuse does seem a bit high! One of those that on paper it can be made to sound a lot better than it may work out in real life.
Dan
Which means....
The market for a transaction like this is people who are affluent enough to care with high enough equity in their home to make it work, have the cash reserves / alternate income, where they don't need the home equity to live, and have not put a life policy in place already.
Seems like a pretty small (but profitable) niche market to me. The potential for abuse does seem a bit high! One of those that on paper it can be made to sound a lot better than it may work out in real life.
Dan
G
Guest
Guest
I have a question about what the OP wants to do, since I dont sell these products, is he trying this because it is the bigger commission for him? In reading the posts, I dont see any benefit of doing it.
- 11,996
I think you're being foolish. They also don't have a mortgage payment anymore which tends to help with the whole cashflow issue.
- - - - - - - - - - - - - - - - - -
You speak in a lot of absolutes. For some folks that can make a ton of sense, certainly not for every person, but sometimes that is the perfect solution.
Last edited:
- 2,024
The commission on this type of deal is huge. Thats the ethical problem.
300k house might be a 15k commission, THEN if you SPWL the 220,000 output you get another 10% or more depending on carrier, so figure 25-35 thousand for 1 deal if you rolled the house into a spwl or annuity.
Thats the other potential use, you reverse the house, take the 60% value then put that into a immediate annuity and take it as full income to use for retirement. But boy oh boy, you've stepped on an ethics landmine if the kids wanted that house, and you do not want to be in court arguing that the kids are wrong about what the dead parents said.
It's probably a suitable sale, if the clients have no children. Otherwise like I said before I'd want the heirs to sign off before I touched it.
300k house might be a 15k commission, THEN if you SPWL the 220,000 output you get another 10% or more depending on carrier, so figure 25-35 thousand for 1 deal if you rolled the house into a spwl or annuity.
Thats the other potential use, you reverse the house, take the 60% value then put that into a immediate annuity and take it as full income to use for retirement. But boy oh boy, you've stepped on an ethics landmine if the kids wanted that house, and you do not want to be in court arguing that the kids are wrong about what the dead parents said.
It's probably a suitable sale, if the clients have no children. Otherwise like I said before I'd want the heirs to sign off before I touched it.
- 15,041
Even then they'll be arguing you mislead them and the parents.
- 2,024
Would need very good disclosure forms and a recording of them being read and explained to the clients, and signed.
The level of recording necessary to insulate somewhat from liability on these things is bad enough it should scare most reasonable people away.
The level of recording necessary to insulate somewhat from liability on these things is bad enough it should scare most reasonable people away.
Don't disagree with you to a point. I pointed out in an earlier post that according to the Scott LFB the additional amount of money would be about $30k. This would be reduced by the cost of reverse mortgage, say $8-9K, so the additional amount is now in the low $20's. there are more than 1 heir. So, my point is that for THIS situation, it does not appear to be worth it.
Similar threads
