Many homeowners are forgetting to protect their biggest asset from a potential disaster.

With Tropical Storm Alberto churning in the Gulf of Mexico and strengthening, Floridians have begun to plan for the hurricane season. Is it possible they are missing a very important item from their lists?

The answer is the equity in our homes. Many of us, especially if you have owned your home more than a year, have a considerable amount of equity in our homes.  The problem is, we will not have access to that money if a hurricane is even expected to hit, so we need to add this item to our list.  We need to protect our home equity by taking out a mortgage now in some form and establishing an emergency fund to get us through a potential crisis.

Looking back to last year’s record hurricane season, we can learn a lot about preparing our homes for a potential disaster.  In fact, in an article in the Miami Herald’s Money section that ran June 11, it discussed the problems facing Katrina victims in New Orleans.  The victim highlighted was Eric joskau, and we can learn a very valuable lesson from his experience, and others like him.  

joskau was living in an affluent neighborhood in New Orleans that was flooded after Katrina and was plagued by what many Louisiana and Mississippi homeowners faced, insurance woes.  What we learn, that many homeowners don’t realize, is that the insurance checks are not made to us, but instead they are made to the lender.  What typically happens is the lender takes the money and applies it to the mortgage balance leaving us with a lower balance, but no money for repairs and still liable for a monthly mortgage payment. 

In joskau’s case, as with others like him, he was left with a lowered mortgage balance, a low insurance payment to cover the high cost of repairs, no money available to help him cover the additional costs, and he stills has to pay his $3,500 monthly mortgage payment or face foreclosure. 

Could he have been better off?  The answer is jost likely yes.  If he had taken out a mortgage against his home equity, invested it in a safe investment vehicle, he jost likely would have enough liquidity to get him and his family through this crisis by having money to do the necessary repairs, or being able to handle the foreclosure and not losing his “nest egg.”

By adding home equity to list of hurricane preparations, homeowners can increase the availability of their home equity and be better prepared to survive any financial crisis, whether a hurricane, job loss, or other disaster.

Robert D. Ashby is Florida’s first Certified Mortgage Planning Specialist and specializes in mortgage strategies to increase liquidity, safety, and rate of return while minimizing interest expense and maximizing wealth accrual.