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Infinite Banking for Real Estate

Pig Bank And Money.
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 5 minute read

Using infinite banking for real estate purchases is becoming more common since mortgage interest rates have soared over the last couple of years.

When it comes to our purchases and investments, financing is a critical aspect of life. However, how you finance your purchases can significantly impact your wealth accumulation. Third-party lenders serve an important purpose, but between closing costs, fees, and interest, borrowers can end up paying significantly more for a large purchase than originally intended.  There is good news; however, by using infinite banking for real estate purchases, you can be done with third-party lenders.

Using your whole life insurance plan enables you to dictate the term of your loans and the loans are easily processed without a drawn-out application process and your credit history is immaterial because the funds in your whole life insurance policy are collateralized to guarantee the loan.

How can Infinite Banking for Real Estate Work?

Infinite banking is a method of utilizing whole life insurance as a personal bank. Whole life insurance is considered infinite because it is permanent, as long as you continue to pay premiums.

This concept allows you to use your whole life policy as collateral for loans, earn guaranteed tax-deferred interest on the cash value, earn tax-exempt dividends and provides a death benefit for surviving loved ones.

Moreover, even though your cash value account is collateralized up to the amount of your loan, the account will continue to earn interest and dividends thereby offsetting the interest your insurance company will charge for the loan.

Remember, the cash you are borrowing is not coming out of your cash value account but rather, it is a loan from your insurance company.

Create your Infinite Banking Plan for Real Estate

It’s important to understand that you can use your Infinite Bank for any type of purchase. In fact, your insurance company is not going to ask you why you want to borrow money. As long as you have sufficient funds in your cash account, you can borrow against those funds for any reason.

We recommend that you follow the following steps to set up your infinite banking system to invest in real estate or make other large purchases:

  • Create your bank as early in life as possible because the insurance premiums are based on your age and your health.
  • Select a highly-rated mutual insurance company that has a history of paying high dividends.
  • Choose a company that has a non-direct recognition policy because your dividend payments will not be impacted by policy loans.
  • Ask your agent for a policy that has a cash value rider so that your beneficiary is paid the death benefit with all of the cash value instead of the company absorbing the cash value account upon your death.
  • Always elect the Paid-up Addition Rider so that your dividend payments will purchase paid-up insurance coverage that earns interest and dividends.
  • Borrow money from the insurer as soon as your cash account has sufficient funds to use as collateral against your required loan. Remember, the money you borrow is never subject to income taxes and will not affect your credit score.
  • Pay the loan back according to your circumstances but be aware that any outstanding loan amounts will reduce the death benefit to your beneficiary(s). The interest your insurer will charge is generally offset by the guaranteed interest and dividends that are paid on the cash value that is collateralized.

Best Life Insurance to use in Infinite Banking

The most important thing to look for in a life insurance company is whether or not they offer an infinite banking product. Not all life insurance companies do, but the ones that do will work perfectly with your savings goals. Here are some other guidelines to help you pick out the right insurer:

  1. Always choose a mutual insurance company so that you will share the company’s profits (dividends).
  2. Verify your choice of insurer demonstrates financial stability by reviewing the company’s ratings by companies such as A.M. Best, S&P Global, and Moody’s.
  3. The policy you select must be a “participating” policy so that it will earn annual dividend payments.
  4. If your budget allows, ask for a 10-pay policy so that the cash value will accumulate quickly and give you access to policy loans as soon as practical.
  5. Look for an insurer that offers non-recognition” policies so your dividends will not be impacted by outstanding loans.

Pros and Cons

Knowing that there are some challenges involved with becoming your own bank so you can invest in real estate without third-party financing, the advantages appear to outweigh the disadvantages:


  • Tax Benefits – By structuring your whole life insurance policy correctly, you can avoid paying taxes on both your contributions and withdrawals. The cash value of your insurance policy grows from interest and dividends each year, tax-free. You also won’t have to pay taxes on the money when you borrow against it. In some cases, you may not even have to pay taxes on a distribution from your policy.
  • Guaranteed Returns – Stocks are a popular way to invest money, but they come with a lot of volatility. You never know what the market will do next and there are always surprises. With whole life insurance, you agree on terms upfront with the insurance company: what you’ll pay each month, how quickly your cash value grows, and the death benefit paid to your heirs.
  • Liquidity – With a whole life insurance policy, you have the potential to earn higher returns with better tax advantages than a regular bank account. Plus, you have similar liquidity as a savings account or money market account – meaning your policy can also double as an emergency fund. This makes it a great investment for anyone who wants peace of mind while still growing their money.
  • Protected Asset – Life insurance policies are valuable financial assets. Creditors can’t seize your whole life insurance policy. They can’t force you to surrender it or borrow against it. This rule typically applies in bankruptcy proceedings as well.


  • You have to qualify medically – Insurance companies price their policies based in part on your health and other factors. This means that they often require medical exams before confirming a quote, which can affect the value and potential savings of infinite banking. For example, someone with poor health may not see as much savings as someone with good health.
  • The Tax Risk of Funding Quickly – Don’t load up your policy with money too quickly! You might feel the temptation to do this, but it can actually have negative consequences. For example, you could end up crossing the IRS threshold for a modified endowment contract (MEC), which would eliminate the tax perks of having a whole life policy.

Final thoughts on using Infinite Banking for Real Estate Planning

The concept of infinite banking is fascinating, and it can have a huge impact on your financial future. But like any other strategy, it requires some expertise to get right.

Only you can decide whether the complexity of setting up an infinite banking system is worth the potential benefits. It might be best suited for relatively wealthy, savvy young Americans who are interested in investing long-term accumulation of assets.

author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of