How To Use Life Insurance To Pay Off A Mortgage
Are you looking to pay off your mortgage but simply lack sufficient income from your job to do so? Fortunately, there’s an alternative way for you to finance this type of debt: by using life insurance. However, there are several types of life insurance policies, so it’s important to understand the differences between these products. After all, a mortgage is one of the most important investments you can undertake.
Paying Off A Mortgage With Life Insurance
One of the benefits of owning a life insurance policy is that both you as the policy owner and your beneficiaries are eligible to pay off your mortgage with your policy. If you were to pass away, the life insurance policy can be used toward any mortgage payment. However, if you choose to pay off your mortgage earlier using life insurance, here are four steps you can take.
1. Identify Your Policy’s “Net Cash Surrender Value”
This figure represents the total sum of equity accumulated as a cash balance. You can find this value on the latest statement from your insurance provider. It’s highly recommended that you buy a term life insurance policy (which is often highly affordable) that can cover at least the amount you pay for your mortgage. This can help ensure that your loved ones (“beneficiaries”) receive death benefits, which represent the policy’s face value if you pass during its “term.” Your beneficiaries can then use the policy’s proceeds — which are typically tax-free — to pay off your mortgage. If they have money left over, they can use it any way they want.
Remember that with mortgage life insurance, however, your lender is the beneficiary. With this type of policy, your premiums can stay unchanged but your policy’s value declines over time as your mortgage loan balance decreases.
2. Determine Your Repayment Strategy
Once you have your net cash value, decide whether you want to borrow against your life insurance policy funds or simply withdraw them. Most insurance companies let you borrow money at a relatively low interest rate and repay your mortgage whenever and however you want.
3. Request Funds From Your Insurer
Your insurance carrier will generally send you a form to request the money you need to repay your loan. Certain insurers even send a representative to help you fully understand your policy. Be sure to ask as many questions as possible during this stage.
4. Pay Your Mortgage Lender
The final step of this process involves depositing your money and writing your mortgage lender a check to repay the balance of your loan. As with any other financial process, be sure to consult with an experienced professional to receive expert recommendations on how to repay your debt given your unique situation, goals, and needs. You can also use a mortgage repayment calculator.
Keep in mind that there are several other options for paying off your debt besides using life insurance. For example, if you have credit card debt, you can use a home equity loan to pay this off at a low interest rate. You can also utilize a balance transfer card as a tool for debt consolidation. (Many credit cards initially offer 0% APR financing for a few weeks).
Get Started With Life Insurance Today
Contact the professionals at Matador Insurance to learn more about how you can use life insurance to repay your mortgage. We offer several high-quality life insurance policies that can help you pay off your debt within a reasonable timeframe. Our experienced agents understand exactly what situation you’re in and will guide you through every step of this process, regardless of your financial situation and goals. Contact Matador Insurance online today for more information about our products or to get started.
