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/biz/ - Business & Finance

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54454382 No.54454382 [Reply] [Original]

I live in Florida and we have insane insurance costs. I bought my house in 2018 for 1.15M and took a 486,000 loan on it, which I refinanced during the pandemic to 3% 30 year fixed. My house is the cheapest in the neighborhood, the average home value in my neighborhood is 6M-10M, my land (with no house on it) is worth about 2.5-3M currently according to the bank. So, my tiny Florida home is really worth land value (despite being perfect for me, someone who bought it would build a big house on the land).

In order to have the mortgage, I have to insure it for windstorm and flood. Flood is cheap, windstorm is not! My flood insurance is 1,834 per year, and my windstorm is (get ready) 26,771.75 with a 5% deductible. It's also supposed to go up significantly this year, I don't have rates yet but it could be well above 30k!

I have 1.3M in the bank right now sitting in 3 month t-bills that I've been trickling into the market, should I pay off my mortgage and go uninsured? If the storm comes and wipes me out, then I just sell the land and rent? Anyone have some financial or fatherly/motherly advice on this? My dad lives nearby so I could crash with him if I had no place to live, I also could crash at my office (I have a little apartment there/bunk space).

STATS:
Cash available (currently in t-bills earning about 4.5%): 1,480,318.54
Loan Balance: 457,348.13
Escrow Balance: 19,079.45
Monthly Escrow: 4,478.73
Home + Windstorm insurance cost: 26,771.75
Flood insurance cost: 1,834.00

Last payment (903.37 went to principal, 1,145.63 went to interest, 4,478.73 went to escrow)

>> No.54454467

> Florida, where floods happen roughly every 3 years
> 30 years
> Uninsured

Pick two.

>> No.54454501

>>54454467
somehow my house is still here 70 years later

>> No.54454504

>>54454467
On a second thought

That insurance is a total scam. Solid hedge if the land remains that much expensive.

I'd pay it off.

>> No.54454599

>>54454504
leaning that way. just wonder if the neighborhood goes bye bye in a storm what the land remaining is worth. I guess people just rebuild...

>> No.54456467

>>54454382
Find out how much legitimate risk there is from a hurricane. I’m sure there is some kind of engineer you can hire to do a wind assessment. My home in Florida is protected on all sides by trees and has no chance of ever seeing winds above 80. Never had damage from a storm. If you’re on a lake or ocean, think twice. Either way the insurance is a waste

>> No.54456529

>>54454382
my mom is in FL, took two years of haggling by a third party negotiator she had to hire, just to get a chump change payout after a hurricane.
wasn't even enough to redo the roof and siding, not to even mention the interior problems that occured due to deferred maintenance while waiting for the insurance.
this was state farm btw and she had the s-tier baller policy she paid out the ass for.
i would never pay for casualty insurance voluntarily, fuck those kikes

>> No.54456647

My insurance keeps going up. Someone make it stop
I live in Florida too

>> No.54456682

>>54456647
Lmao enjoy the fruits of having your house price go up

>> No.54456797

Hard to say, the insurance market in Florida is a not a real one. It's being inflated by bad actors filing fraudulent claims is beating up insurers unabated. Hopefully they can get it sorted out sooner rather than later.
---
That aside:

What I think makes this a no brainer is that interest rates are so high you make money not paying it off

>Loan Balance: 457,348.13

That's ~20K return alone from 4.4% interest rate money market accounts which is trivial to find if you held that in cash.

I have a similar loan so I think you're paying around ~$13K in interest on the loan right now a year. So maybe you're only $7k ahead vs paying the loan off.

But I also itemize so I get 30% of that $13k in interest back off my taxes.

What's weird is that why does your bank require you to have such high insurance requirements? Is there a way you can change your insurance to something that will just cover the remainder of the loan to the bank instead of replacement value?

>> No.54456937

>>54454382
>Monthly Escrow: 4,478.73
wtf, how? That's close to $54k a year. Your insurance is $27k. Your taxes are another $27k? Fuck.

How often do homes get destroyed in your area? Like what are the chances?

Also consider that you're paying 3% annually on the mortgage, but its' tax deductible. Meanwhile, you're making 4.5% on t bills but they're taxed on capital gains. Some back-of-the-napkin math tells me you'd save about $22k a year on the insurance if you paid off the house, not $27k. Of course if they jack up the rates then you'd save more.

Lots to consider but I'd probably pay off the house and drop the wind insurance. Is there anything you can do to reinforce the house? Add brackets and such to the roof? That might be worth pursuing.

>> No.54457516

>>54454382

What part of Florida are you in? I think you should sell your house + land and get a cheaper house somewhere else. And yes pay the mortgage off.

I just recently bought a two-story house in Florida for 2.4m with a 1.8m loan at 6% fixed rate. Gonna pay it off in 2-3 years. No idea how your insurance + wind is 26k btw. Mine is 12k.

>> No.54457607

>>54454382
>I bought my house in 2018 for 1.15M and took a 486,000 loan on it, which I refinanced during the pandemic to 3% 30 year fixed. My house is the cheapest in the neighborhood, the average home value in my neighborhood is 6M-10M, my land (with no house on it) is worth about 2.5-3M currently according to the bank.
sell it
>I have 1.3M in the bank right now sitting in 3 month t-bills
holy fuck anon sell it all

>> No.54457816

Jesus Christ this type of money is so out of my league I’m not sure what to say. Would you be ok if the worst happened and you lost everything? Wouldn’t the value of the entire area go down since no one is going to want to buy land that’s all fucked up after a natural disaster? Also 23k a year seems small when you have millions in the bank, are you retired?

>> No.54458613

>>54457607
Yeah, dude's literally made it if he sells. Buy a modest cottage somewhere and never work again.

>> No.54460450

>>54456529
Yeah, they really screw you.

>>54456797
Apparently we just had some rather sweeping tort reform this week, but I kind of doubt the insurance companies will lower rates...plus housing rebuilding costs are so much more expensive now .

Your math on the cost of the insurance versus the loan spread is a good point. My bank is just Freddie Mac or whatever, they sell the loans off. Not sure if I can negotiate that down.

>>54456937
Yep, taxes are 27k. Your math is a good point.

I donno, this house has been here since 1950. However it has survived.

>>54457516
I'm in Miami Beach. Can't because I have a good job here.

>>54457607
>>54458613
I have a good job here and my dad is getting old. Maybe when my dad dies I'll move.

>>54457816
I still work. I'm 37. Yes, I'd be okay if I lost everything. I mean I'd still have the land.. It would hurt though, and the land value would go down if the whole area was rekt for years.

>> No.54460709

>>54454382
>1.3M in the bank
should we tell him?

>> No.54460761

>>54454382
I thought (((insurance))) didn't cover hurricanes anyway.

>> No.54460898

>>54460709
well it's actually 1.5M and it's stilling in t-bills, so not "the bank", but I was just typing quickly. I'm earning like 4.5% on it now.

I also have some money in the stock market

>>54460761
They have a higher deductible for named storms and then try to screw you when it comes time to pay, yeah. There is also a ton of fraud and litigation too, so, that raises costs.

>> No.54460993

>>54454382
no, you shouldn't go uninsured. what you do when you have a networth like yours is, you figure out what you need to spend in terms of insurance. home/auto/life/health/and if your portfolio needs it: tail risk. then you put enough money in a good earning dividend fund paying out monthly like JEPI to cover all of that. let's say it's all total $~40k annual. put $~400k in JEPI and you have that covered. set it up to auto deposit the monthly dividends into a checking account that you auto pay your insurance bills from.

now you have $~1.1 million in the bank which does not significantly change your position in life from $~1.5 million EXCEPT nothing can really fuck your life up and you don't have to think or worry about it. and if you really need that $400k at some point it's still there.

>> No.54460998

>>54454382
Move out of usa

>> No.54461206

>>54460993
I have money but I am still an idiot. JEPI is an index fund with dividends?

Some years I make a ton of money and other years I make zero dollars, so on the years where I have no income it would be nice to have some income passively. Right now making 4.5% in t-bills is pretty comfy.

>> No.54461308

>>54454382
Blows my fucking mind that you have this situation with the money you have and youre asking people on 4chan for advice like how do you wipe your own ass at this point?

>> No.54461520

>>54461308
>t. ngmi