If you own a house mortgage-free, it has a return.

The return on your equity is equal to the nontaxable value of the shelter it provides (remember, without it, you would have to pay rent) plus the annual appreciation in value. Lately, that has been a pretty nice return.

The goal of the marketers is to transfer the massive home appreciation of the past decade to commissioned financial products.

Owning a house with a mortgage is like owning a stock purchased on margin. The life-insurance marketers don't discuss owning your house on margin, but that is what they are advocating.

Basically, you are gambling that your investment in life-insurance products will earn more than the cost of the interest-only mortgage.

For that to work, the return on the equity-index life-insurance policy — net of sales commissions and life-insurance costs — must exceed the cost of mortgage borrowing.

That is unlikely for two reasons.

• First, insurance companies are lenders in disguise. They take in premiums in the hope of lending the money out at a higher rate of interest than they pay on it.

It is unlikely they would design a product whose cost of funds (your cash value) would be higher than the interest rate on low-risk mortgages.

• Second, equity-index products don't provide full stock-market returns.

They provide either a capped annual appreciation or a percentage of annual appreciation. The index does not include dividends.

It is also unlikely that annual appreciation in the next 20 years will match annual appreciation in the past 20 years.

Success with this idea is based on a long series of "if-then" statements, as it ignores the risk of owning your house with a virtual margin account:

If you borrow at a low and stable interest rate ...

If the interest you pay is tax-deductible because it exceeds the standard deduction ...

If you have a relatively high tax bracket ...

If the sales commissions are not destructively high ...

If the life-insurance costs that are subtracted from your return aren't too high ... and

If the equity index performs as it has in the past or better ...

Then it might be a reasonable thing to do.

The sales force that makes its living from mortgage and insurance commissions blows off such concerns. Consumers shouldn't — their home equity is the sales forces' commission income.

Alas, I've never encountered a serious financial planner who knows how to avoid taxes on qualified accounts.

Questions about personal finance and investments may be sent to Scott Burns at The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; by fax at 214-977-8776; or by e-mail at scott@scottburns.com. Questions of general interest will be answered in future columns.