Things You Didn't Know About Borrowing

The volume of interest. We all know that if you pay 6.2 versus 3.49, the volume of interest is going to be greater over time. And that's why we always say the interest rate doesn't matter. Because if you're banking using this concept that we teach, you're going to continue to get ahead every day.

Hi, I'm Taran Souza, Infinite Banking practitioner. I just ended up financial, and with me is Dan Allen, also an infinite Banking practitioner at Ascended Financial. And in today's video, we're going to dive into making sense of borrowing costs. Now, the example that we're going to use is pertaining to mortgages. So it's going to be a little different way of looking at things. It's going to open up a lot of people's minds when it comes down to interest rates. And that's what we're hoping to achieve. Sedan, take it away.

All right, thanks for that, Tran. And yeah, this little video kind of got its energy and its birth from Blank question. That's right. We had an event and we were going through a series of slides, actually, that's called the Truth of Lending. And someone said, you know, it'd be really nice if you showed. Well, if you did the same thing using a policy loan, what would that look like? So we're going to try and help you understand that today this is about the Truth of Lending. So first we're going to talk about what is it that we usually go through when we talk about those slides. So I'm going to start with the Truth of Lending slide that we showed in a multitude of different events over the time. This is what we put up multiple times in different events that we've had. And we're just helping people understand that even though, you know, at the time that we put this together, we used a 3.49% interest rate. And, you know, people go, okay, well, that's. They fixate on interest. And we're always telling people it's not the interest rate, it's the interest volume that you should focus on. Because one thing Taran and I both know is that when it comes to the infinite banking concept, you know, becoming your own banker, what we help people with and that concept helps them with is to recapture the cost of the interest that they're now sending away to some other financial institution. So let's just look at what that cost of interest would be if you had a $400,000 mortgage and you amortized it over 25 years and that interest rate stayed the same for that whole full 25 years. So first off, you can see that your monthly payment would be $1,994.97. So with that, we always show this for, you know, just to help people understand the first month, a big chunk of what you pay is interest. It's a bigger number than the principal. And that just continues to play out over time. You know, it takes a while before those numbers switch. As you can see, after one year, you know, your principal has gone down by 10,000, and yet you paid over 23,000. So you know that there's been a higher percentage has gone to interest. And that's just a fact of life when it comes to amortization and paying loans. And as we walk through it, we always step through this, we show people, because the other thing we always tell them in this piece is that a lot of people, after the fifth year, what do they do? Trent, what do a lot of people do when they're into a mortgage in the first five years? What's a behavior that a lot of people have?

Well, they, they look at refinancing, right? That would be the end of their term, generally five years, sometimes four.

Exactly. So a lot of people refinance. Some people sell and move and do different things. And so what we always point out is if you do that, if you refinance, you just start over again. That's right. You start over. You go and start to pay those higher percentages of interest. And that's what happens when you refinance. So that's just a bit of a background information, because you can see at year five, the interest volume in this particular example is actually less than the principal volume. And you can see after five years, you put out, you know, paid out a pocket some 119/plus thousand dollars, and the principal has gone down almost 55. And as you follow this thing all the way through, which we do in our events where we review this, we just show people this, that over the 25 years, using that 3.49% interest rate, the volume of interest that they would have paid is almost half of the amount they borrowed. So 198,000 is just about half of what they originally borrowed. And so that's where we help people understand you should think more about the volume of interest that's leaving your control towards someone else. And we always tell people is like when you have a loan at a commercial bank, you're helping someone else's, you're supporting someone else's retirement, those shareholders are profiting from that. And so this is the reality of it is there's a low interest rate of 3.49% and yet still over that 25 years, pretty much half of the original amount you borrowed would be the interest cost. So that's just a part that we go through. Now what we're going to do today is really take a look at what happens if a person borrowed that same amount of money using a policy loan. And before I got into that too far, what I wanted to do is talk about a few bits of information. So I'm going to use 6.2% interest for the example of taking a policy loan. And any idea, Tran, why I would use that number?

Because that's the interest rate going as of today by the insurance company.

Yeah, that's exactly right. So the insurance company where I hold all of my dividend paying policies, that's the interest rate they're charging me today. Now some life insurance companies will have lower interest rates, but I'm going to use the one that I'm familiar with. And everybody goes, okay, that's, that's reasonable. Let's use something that's real. And this is real for me. So if I borrowed $400,000 from my policies right now, I would be paying the life company 6.2%. And if I paid it back over a 25 year period, that would mean that I would to put $2,606.97 out every month. That's just the reality of what it's all about.

So, and as you're doing that, Dan just, just want to chime in really quickly for everyone that's wondering, where are these numbers coming from? So the previous slide with regards to the numbers based on a loan with a commercial bank for a mortgage, those numbers were derived from just a simple online mortgage calculator. So there's a ton of those on the Internet. You can use that and you'll get similar numbers to what we showed. Okay. And for the following numbers coming up on your screen, this is based on an example policy that Dan has looked at and he's taking the numbers from the illustrations associated with that example policy.

Yeah, and really when they find those amortization spreadsheets and documents that, you know, just put different interest rates in, this is just, you know, the difference of 6.2 versus 3.49. And you know, reality is, and we, we know that today interest rates are going up and you and I both know there's some people that are paying 6.2% on their mortgages. So that's a fact too. But this is just looking at if you had to pay 6.2%, your monthly payment would be have to be $2,606.97 if you want to pay off over 25 years. And as you can see, as soon as an interest rate, a higher interest rate is applied, the cost of interest goes up. Especially early on. You can see while the total payment went up and a big portion of that was interest first month out of that $2,606, over 2,000 of it is interest. And that's very similar to the last one. The numbers are just bigger because the interest rate is higher. And as you walk through this, this is the same stuff, you can just see that there's going to be more interest paid over the 25 years using 6.2%. And that is always the case. And so this one is just a good example of what would it look like if you had a 25 year amortization period on a mortgage and you paid 6.2% all the way through that period of time. And as you can see when you get to the end now, the cost of interest is almost equal to the amount you borrowed. Remember in that last one. Let's go just look at that last one again here in a minute. Because this example, you know, the actual cost to you if you had this mortgage and this amortization and that interest rate would be $183,000 more than in the previous case. Now, just to take you back, this is what the previous case looked like. Yeah, 3.49% interest, 198,000 of interest over that 25 years. And now with the 6.2% interest rate, a lot changed. It went all the way up to 380.

So hold on, Dan, 380 is a big number. That's more than the previous number of 198. So right now I'd prefer to go with the 3.49%. And again, I'm talking for the people out there in the audience that are wondering the same thing. What's going on?

Yeah, this. No, those two examples that we've gone through, Tran, are just simply the impact of changing the interest rate. And again, you're going to pay, the volume of interest is going to go up if you have a higher interest rate. So, you know, it doesn't matter where we push that up to 5% or we push it up to 8%, the numbers are going to be different and it the volume always gets bigger. And what we teach people through this all Is like always focus on the volume of interest. And why would we encourage them to do that? And why would we encourage them as infinite banking bankers, why would we encourage them to use a policy loan when they could go out there and find an interest rate that's lower and over that 25 years, well, they would pay less interest. So there's a couple of reasons why we would have that so we can get into those. But I just wanted to be able to show you why, using this particular example, 6.2, how would that be an advantage to someone to just basically use a policy loan to do the same thing, pay that 6.2 versus going to a commercial bank and paying a lower interest rate? Because we're going to say you can get a lower interest rate right now, even though as we speak this week interest rates are going up. And. But we're going to just give everybody the benefit of the doubt and saying you can get less than 6.2. So great question, Trend. And I'm sure a lot of people are saying, I don't know, I'd rather just go to the commercial bank, get a lower interest rate. Because isn't that what people focus on, the lower interest rate?

Yeah, yeah. Everyone's about rate, rate, rate, rate, rate, but no one thinks about volume.

Yeah. And these are both volume. So as you can see, yeah, there's less volume interest you pay if you can get it for 3.49 and if you got it for 6.2. So why would I even consider doing this? Well, let's just talk about that. What's the advantage of using a policy loan for this mortgage? So what I did just to help people understand this is I built an illustration using a 35 year old male. And that particular illustration was where he was going to put in $25,000 in premium for 14 years. And okay, well, 14 years, it's going to take 14 years to get, you know, to have to capitalize this thing. Now what are, what's one thing that we've learned from this whole process that Nelson taught us about? What do we have to be comfortable doing in order to use the infinite banking concept? Trend?

You have to think long term. Think long term, think three generations ahead is what R. Nelson Nash likes to say.

Exactly. And the other thing he said, and it's, and those are, these are both part of his five golden rules, is don't be afraid to capitalize. So you could capitalize this and get to that 400,000 quicker than 14 years. You could do it in four or five years. Quite easily if you had the capital to put into a policy at that rate. So I just picked a number that's more comfortable for people to think about. 25,000. But yeah, it's going to take longer. And that's one of the things that, you know, Nelson states in his book, always be prepared to capitalize your system for 10 years or more. And that's what I tell people it's like. And if you will have this great objectives, big objective, it's going to take capital to get there. And once the capital is there, and that's what we're going to look at now, we're looking at a situation where you built that capital. And I don't care whether it's 14 years or whether it's six years or five years, you could have done it in that period of time. But we're just going to use this example to help you understand some of the advantages that you could get from using a policy loan versus going to a commercial bank and paying a lower interest rate. So in this particular example with this young man, in the 15th year, he could. He could borrow 400,000 and he could have borrowed more than 400,000, but we're borrowing 400,000. So he's slightly over that after 14 years of capitalization. The other thing I did is, for this example, just to keep that noise out of there, is I showed that he stopped putting premiums in. Now, Tran, did he have to stop putting premiums in? Nope.

He could have continued.

He could have. That was a choice he got to make. And he could have stopped before if he wanted to, but it's just again, how quick does he want that capital pool to build up to 400,000. So he made those choices and he decided after the 14th year wasn't going to put any more premium in. And it really helps you see with more clarity as to what all this really becomes an advantage for people. So let's look at some of the other attributes here. So, you know, interestingly enough, cash values grow every day. Has since the day he started that and settled that policy. The day he settled that policy, his cash value started to grow, and they're still growing every day. They have to.

And that's the key, everyone. So really pay attention to what Dan is talking about right now, because it makes sense to get a mortgage through a policy loan versus a commercial bank. So really pay attention to what Dan's about to say.

Yeah, and it's like that is a key thing that we teach everybody, that it's factual. It's one of the guarantees. I call it the key kind of guarantee in that contract that you have with that life company. And that policy is a contract. It's a unilaterally binding contract. The life company has the obligation to fulfill all the terms and conditions in that contract. And you have an obligation to pay premiums up until a point where, you know, there's enough energy that you don't have to pay. But, yeah, that cash value has to grow every day. So as you think about it, every day that that $400,000 loan is outstanding, yeah, they're paying it back. The cash value continues to grow because the key thing is that this young man never took his value out of the policy he borrowed from the life company. So his cash value kept on growing every day. And over that 25 years, it would have grown. Well, you can see the number. By almost $900,000. That's right. The cash value would have grown by over 900,000. So, Tran, remind me, how much interest, what have you paid to the life company over that period of time?

So based on the 6.2%, he's looking at $380,087. So just go with 380 for simple math. 380,000 would be the interest.

Right. So would you have a problem with paying $380,000 in interest if your value grew by almost 900, 895 at the same time?

Absolutely not. I mean, you're telling me I have this debt via the policy loan, but my cash value, which could be considered my net worth in this case still continues growing every single day. And we're not even talking about the potential equity growth in the property. We're just talking about the policy. So you're telling me that my network's going to keep increasing as I pay this interest? That's music to my ears.

Exactly. And if you think back, do you remember what the total amount of payments that would have been made on that, you know, $400,000 mortgage at a 6.2% interest rate. Do you remember what that was, Fred?

Yeah. Yeah. So it would be $782,091. I'm looking at my notes here. So that would be the total that would be paid out by the individual in this case.

Yeah. So is that less or more than what the cash value went up during that period of time?

Sounds like it's less to me.

Yeah. So everybody should stop and think about that. So even when you consider the principal that you paid back against that loan and the interest combined, your Cash value grew to a larger number than what that was. And so this is when you think about the advantages of the concept, which we know as the infinite banking concept, and what we should do right now, Tran, is just encourage everybody. If they don't know about that concept, go to watchibc.com that's right, it's called watchibc.com it's a 90 minute video. And it'll just help you understand a little more about how this concept works and what difference it can make. Because there's a lot of elements. This is a very specific case and every case will be different, but this is a very specific case utilizing a dividend paying whole life insurance policy for banking once you have it capitalized. And I always go to, you know, I spend a lot of time. I don't know about you, Tran, but I spend a lot of time with people helping them understand that capitalization phase that's needed now. Absolutely. Nelson, in every one of his illustrations in the book called becoming your own banker, and you can see it back there in my stand, he always pointed out that there had to be a capitalization period of time. And yet, you know, there's other things that people go, how would you help them, Tran, if they said, well, I'm going to be buying a home sooner? Like, how would this concept help me if I'm buying a home, you know, and I don't want to wait 14 years or whatever to get that capital built up.

Yeah, great, great question, Dan. And I'm sure a lot of you have this in mind as well. Hey, I'm looking to purchase a house in the next whatever amount of months or some of you might already have a house and wondering, okay, how can I, how can I take advantage of this in my situation? And that is a completely different strategy. We call it the debt recapture strategy. So it's a completely different topic per se and discussion. So I would encourage everyone to check out the video here. We've already created one specific to the best way of paying your mortgage and recapturing your mortgage in Canada. So check out that video right here. And that's how you can learn more for those who are looking at purchasing a house shortly and for those who already have a house and a mortgage.

Yeah, I appreciate that. Well said. And, and so just going back to this and looking at again, because we really want you to, you know, realize a couple things. A, this is when someone started after they capitalized their system so they had enough capital there to start to utilize it for a big purpose. Like a $400,000 mortgage. And then they just used it for banking. They paid it back. Now, one other thing that Nelson taught is that he would have taught us to pay it back at a higher interest rate than the 6.2 or whatever your life company was charging. And again, now, as Tran had said, that's a different topic because today we just wanted to keep it, you know, to a point where you got to see the difference of utilization of a dividend paying policy for banking and just paying it back at the interest rate that the life company was asking for and, and not more. Because what happens if you follow that behavior that Nelson taught you? You'd have paid that $400,000 mortgage off quicker if you paid it back at a higher interest rate. And then the other thing that we, you know, Nelson taught is that after you got that mortgage paid off, you keep making those payments for the same amount of time that you would have made them to a commercial bank. And what he would say to you to do with those extra payments is to put them into premium. And if you don't have a policy where you can put it into premium, start one, because that's how you're going value also. That's a different topic. Didn't want to get into a lot. But the thing that, you know, we really want people to understand is there is all kinds of opportunities when you utilize this process. And think about it, after the policy loan is paid off, the policy owner can now reborrow everything he paid, plus more. Yeah, in this particular example, at the end of that 25 year amortization period, he could borrow 1.354. That's how much cash value. Well, you borrow 90% of that, I should say. He could have boiled up 90% of that 1.354 and that's how much access to money he would have had at the period of time. And it's like, would that be a good thing, Trent?

Absolutely. Absolutely, Dan. And it's important for everyone to understand, again, I'm reiterating that we're not even talking about the property and the value and the appreciation that may have happened over that time period. And this is where this process is so powerful because we're simply talking about the cash values that you have access to. Now imagine the equity that you have built. Okay. Versus the traditional way of doing things where you get the mortgage from a commercial bank. You would simply have the equity built in your home, but nothing else. So you have two assets in this case.

Exactly. Yeah. Because that's a Great point. Because the other thing, you know that you could say from that as well, when you use the commercial bank, who's got all your money?

The commercial bank.

Yeah, that's exactly. They're in the business, they know what they're doing, they're running that business and they're running it so that they can be profitable and they're going to share those profits with their shareholders. So if you're owning that mortgage, you're making those mortgage payments, you know someone else is profiting from that and that's what they're in business to do. So I give them credit for that. They know exactly what they're doing. And all we're teaching you here is how to get control of the banking function as it relates to your needs. And if your need happened to be 400,000 at some point, this is one way you could get control of that need and apply it. And what's the advantage for you? Well, as you can see, all the interest that you paid, you get that back because your cash value growing every day. It has to by contract. And even when you look at this particular time after the 25 years is up and the amount of cash value this person would have available to him, what happens the next day to that cash value trend goes up. Exactly. It's going to keep going up. And how long does it keep going.

Up until, until age 100, until you turn age 100, it's just going to keep going up. No matter what happens outside your property, it doesn't, the cash value doesn't care if your property goes up or if there is a drop in property value. Doesn't matter. Your cash value is going to grow every day.

Exactly. And the only other time it stops is when you die. So if, if you graduate from life before you're age 100, then that cash value stops growing and your beneficiaries will get paid out whatever is there for death benefit. And so yeah, that's just the piece of it that we really wanted you to help you understand. Because yes, interest, the volume of interest, we all know that if you pay 6.2 versus 3.49, the volume of interest is going to be greater over time. And that's why we always say interest rate doesn't matter. Because if you're banking using this concept that we teach, you're going to continue to get ahead every day. The energy, we call it a tailwind that you create and you've seen the tailwind effect over that 25 year period, that tailwind just kept growing and Growing and growing and getting greater and greater. I thought you did a great job at speaking to Duran about equity and just how that is an asset. You're just creating more and more value every day. Even though you, that person was using it for that mortgage, they were creating more value for themselves every, every day. What would you have just to say at the end, Taran, just as a wrap up for everybody today.

Yeah. So what I would say is I would encourage everyone once again to go ahead and click watchibc.com if you want to learn more about this process. Check out our other videos as well that dives deeper into other strategies with regards to this process and concept. And I would say if you got any value from this, please hit the like button for the YouTube algorithm and subscribe to the channel.

Yeah, exactly. And yeah, we love comments too. And you know, so if you have comments, by all means put them there because it's, you know, every time we put up numbers, you know, people wonder about numbers and that's, there's always danger with numbers. But it's, I hope you got through this. That more than just the numbers, it's the process of banking and how you get ahead in life if you use this process versus, you know, a commercial bank or even spending cash. That's another topic we didn't even get into. But we've got a lot of great videos on that and just go ahead and watch them and until next time, we wish you well.