Can I borrow on a life insurance policy to buy property?

Q Is it possible to have a whole life insurance policy and use this to borrow against to buy a house, for example, a life Insurance policy to mature in 20 years' time with a sum assured of ?200,000?

It has been suggested to me that this provides maximum security for the minimum payment.

AP

A My first thought when reading your email was that whoever suggested this to you should be shot - or at the very least, reported to the Financial Services Authority.

But then I thought that perhaps that was a little hasty so I spoke to someone at independent life insurance broker www.lifesearch.co.uk who also happens to be an experienced mortgage adviser.

He was simply baffled by the idea and said he had never heard of anything like it.

So to answer your question: yes, it is possible to buy a whole life insurance policy but it is unheard of to borrow against such insurance to buy property. And you don't need to because the property itself acts as security for any loan you take out to buy it.

Also, buying life insurance in connection with property purchase is usually only necessary if you have dependants who would need money to clear the mortgage loan if you were to die before the mortgage came to an end. But even if this does apply to you, there is no need to take out life insurance before taking out a loan. In addition, if you do need to buy cover for a mortgage, it is also generally considered better - and a lot cheaper - to buy term life insurance rather than whole life insurance.

So if, as I suspect is the case, you are not yet ready to buy property but you are intending to buy sometime in the future, rather than paying for an unnecessary life policy, a higher priority for any spare cash you have should be saving up for a deposit.