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MORTGAGE KNOWLEDGE CENTER

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  1. Home
  2. Mortgage Knowledge Center
  3. Buying a Home in an Hurricane Zone: What You Need to Know

MORTGAGE

Buying a Home in an Hurricane Zone: What You Need to Know

What you'll learn: Learn about what should be considered prior to purchasing a home in a hurricane zone

EXPECTED READ TIME: 4 MINUTES

June 21, 2023

Buying a Home in a Hurricane Zone: What You Need to Know

Purchasing any home is a significant decision for a buyer, and the process can be even more complex when you are considering a property in a hurricane zone. Hurricane zones are areas that are vulnerable to hurricanes. These intense tropical storms with high winds, heavy rain, and storm surges can destroy properties when they hit. As a prospective homeowner, it is crucial to understand the risks associated with buying a home in a hurricane zone, and this information should be incorporated so that you can make an informed decision. We will explore several factors that you need to be aware of, including the extra costs involved with upgrading your home, insurance needs, and additional optional insurance you may wish to purchase if you are going to buy in a hurricane zone.

What You Need to Be Aware Of

When buying a home in a hurricane zone, one must be aware of the risks associated with these areas. Hurricanes can cause significant damage to homes, and the cost of repairs can be substantial. In some cases, homes may need to be completely rebuilt. Additionally, the damage of a severe hurricane can make it impossible for residents to return to their homes for an extended period. As a result, it is crucial to be aware of the potential dangers and to weigh the risks and benefits of buying a home in a hurricane zone.

Just a Tiny Change Can Have a Significant Impact

Where you buy can make a huge difference in your premiums and risk, a property just a few miles inland could be drastically different from a beachfront home. It comes down to flood hazard defined by the National Flood Insurance Program’s Rate Map. You don’t have to be near water to be in a flood plane. High-risk areas are marked as Special Flood Hazard Areas, with at least a 1 in 4 chance of flooding during a 30-year mortgage. Check the designation when hunting for a home.

A home type can make a difference; some homes are designed to withstand hurricanes, dome shapes for wind, and homes built on stilts to withstand water may provide a better rating and lower insurance payments. A real estate agent can help you find such homes, and an inspector can provide a resistance assessment, ensuring a potential purchase is up to code before an offer is made. The cost to remodel may be more than the insurance savings, so it may be worthwhile to keep looking. 

Extra Costs

In addition to the costs associated with buying a home, there are several extra costs that come with owning a home in a hurricane zone. For example, homeowners may need to invest in storm shutters or other protective measures to shield their homes from damage during a hurricane. Homes in hurricane zones may require regular inspections to ensure that they are structurally sound and able to withstand high winds and rain.

Anyone in a hurricane zone will want to make sure trees are trimmed, and gutters are cleaned regularly. A generator is a good investment in case of power failure, with fresh gasoline/propane to keep it running.

Older Homes Can Cost More

Know when a home was built or if it has been brought up to code. Building codes in Florida were updated significantly in the early 2000’s, and get updated about every three years, the same may be true of other states. Look for the age of the roof; these are often damaged by hurricanes and may need to be replaced sooner than later, which can come at a significant cost.

Upgrading Your Home

It may be necessary to upgrade the property to minimize the risk of hurricane damage to your home during a storm. Upgrades can include installing new windows or reinforcing the roof to make it more resistant to damage. Make sure openings, windows, doors, and garage doors, are impact-rated or protected with code-approved devices. Even if it is an older home, there may be upgrades, such as metal straps and clips in the attic, connecting the roof with the walls, that will give the house more protection. Other additions, such as storm shutters and panels, if not already there, can result in an insurance discount if added. Upgrading your home may also involve improving the home’s overall infrastructure to make it more resilient during a storm.

Insurance Needs

The most important thing to do when living in a coastal home is to ensure you are fully covered by your insurance. Owning a home in a hurricane zone requires obtaining a specific type of insurance coverage known simply as hurricane insurance, and it provides protection against damage caused by a hurricane.

In addition to hurricane insurance, it is also important to have a standard homeowner’s insurance policy, which covers damage from other types of natural disasters, such as fires. For most, you should also purchase flood insurance.

Homeowners and Hurricane Insurance

The location of your home will determine how much you pay for homeowners insurance and whether you need to buy a separate wind policy. A separate wind policy or attached rider provides protection in the event of flying debris and heavy winds.

rider- optional insurance coverage provided at an additional cost

Whether a hurricane hits or not, you will need to purchase hurricane insurance. Prices can vary wildly; Florida homeowners are paying an average of $2,670 per year, up from $2,084 in 2012, for homeowners insurance, with hurricane protection that helps with wind and some water damage. It may be counterintuitive, but you should meet with an insurance agent before house hunting to understand a rough estimate of your costs so that you don’t have any surprises after a purchase. It is advised to shop around for at least three offers; 76% of those that shopped for insurance saved money doing so..

Hurricane Deductibles

Policies differ with regard to financial responsibility when making a hurricane claim. Florida’s hurricane deductible is based on a percentage and the property’s risk (is it in a danger zone), with a $500 minimum deductible, ranging from 2% to 10% of the policy’s dwelling limits. 

Flood Insurance

Homeowners insurance with wind and hurricane coverage protects you against high wind, tropical storms, and hurricanes, but does not cover floods, and sadly many homeowners don’t know this. Flood insurance can be obtained through the National Flood Insurance Program or from private insurance companies, and the US average flood insurance price for 2022 was $767 per year. Prices vary significantly; for example, in Texas, costs can range from $65 to $10,000. Flood insurance covers water damage from flooding, storm surges, levee breaks, and heavy rain, among others. 

Summary and Final Thoughts

An unobstructed sea view may be lovely until the home you are looking from is washed away. Buying a home in a hurricane zone requires careful consideration of the potential risks and costs associated with this type of property. Looking for the right home requires understanding the extra costs involved, being willing to upgrade the safety features when needed, knowing your insurance needs, and adding optional insurance when it is useful. While living in a hurricane zone increases risk, these risks can be mitigated, and you can help protect your home and family during a hurricane.

For more information about PenFed Mortgages:
 

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How to Prepare Your Family and Your Home for Natural Disasters

Get guidance on emergency professionals' recommendations for preparing your family and home for natural disasters.

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Curious about you homeowner's insurance limitations? Here are some items that are probably not covered under your policy.

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Tips for Finding Excellent Contractors, Electricians, and Plumbers

Not sure how to decide who to hire for your home renovation, electrical work or plumbing? Here are some tips to help you make a more informed decision.

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Mortgages 101: What First-Time Homebuyers Need to Know

Overview of mortgage terminology that first-time homebuyers will come across when buying their first home. It's important to understand the terminology used so buyers can better understand their mortgage.

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of October 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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IMPORTANT NOTICE

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The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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