Palm Beach Real Estate and Loans

Floridians are anticipating the end of the "hurricane season" this November.  Gone will be the stress of a potential evacuation and Palm Beach homeowners will settle down for a beautiful winter in Paradise.  This special edition of the Mortgage Rates Report is written in reflection of the see-saw week we had in Southern California with the wildfires.  Floridians, like Californians, enjoy our stellar weather and coastal living.  That enjoyment, however, comes with a price.  Natural disasters, like hurricanes or wildfires, can destroy property; that can have a dramatic financial impact on an unprepared homeowner.  Insurance companies negotiate claims after a disaster in an effort to reduce their exposure to liability.

The nefarious process of claims settlement sometimes induces the insured homeowner to agree to an "offer" that is far below what their policy covers.  A displaced homeowner, with a lot of property equity, may find that their strategy of debt elimination has strapped their financial reserves.  A wildfire, flood, or hurricane can render that property unhabitable.  The homeowner starts the claims settlement process with the insurance company with one hand tied behind their back- they have very little money because it's all tied up in the property.

Another problem comes from the insurance policy itself.   We advise our clients to update their hazard insurance policy annually to reflect the higher costs of construction.  Lenders insist on adequate coverage so that their investment (the loan on a home) is protected.   What about the case of the homeowner with too much property equity?  They are usually the most underinsured.  The lenders don't worry about the property with a lot of equity.

The result?  A hurricane destroys the home, the policy coverage is inadequate to rebuild a similar property, and the property equity, built through appreciation and prepayment of the home loan, quite literally,  washes away with the tide.

Monday, I received a call from a frantic homeowner in the San Gabriel Valley region of Los Angeles.  She was concerned about her line of credit being "frozen" due to the nearby fires.  We arranged a home equity line of credit for her last year as "disaster insurance".  I directed her to immediately access the line via wire transer to her bank account.  Thankfully, this wasn't needed.  The important thing is that she was able to set aside a six-figure reserve fund, in anticipation of disaster.  Hasty?  No, this is prudent equity management through proper mortgage planning.  Her family was able to rest easy on Wednesday when the six figure wire came through to their bank.  The few hundred bucks in interest she'll pay is minor in comparison to the anguish some California homeowners will experience during the insurance "claim settlement".

Palm Beach homeowners have been quite fortunate these past 6-7 years.  Most have seen their properties double in value.  The rise in property equity and its affect on the average Floridian's net worth has been amazing.  Manage your property equity.  Leverage your appreciated equity and place the excess money in an investment account so that your financial future is intact....regardless of what disaster Mother Nature throws at you.