It is hard to imagine the impact of what a hurricane like Katrina could do to Sarasota. We have been in the paths of many hurricanes before and have escaped to a large extent “unscathed”. But what would happen if a devastating hurricane hit Sarasota? What would it do to the equity in your home?
I preach to my clients about not paying off your home mortgage. Although having no mortgage is a desired position, you are giving up control and liquidity of your money. Having cash in a safe side fund to write a check and pay off the mortgage is a more advantageous position. Hurricane Katrina reinforced that belief to a colleague of mine who is a financial advisor in New Orleans. He had clients on the Gulf Coast who lost their homes and contents to that devastating storm. During telephone conversations with them, he said he heard cries and anguish in the voices of those who lost everything. Those who had no mortgage were caught in the dilemma of negotiation with insurance companies and hiring attorneys.
Will they ever make up the equity to which their homes appreciated? Probably not for a long time. They had no mortgage but now they have no money. Some don’t have a job or business any more. Suppose that were you and you needed that equity to put your kids through college, pay for a wedding or perhaps you were planning on downsizing and using the additional funds for retirement? Instead of working with your financial advisor, you could be dealing with an insurance adjuster.