I've been keeping the mortgage on my house, even though I have the savings to pay it off, because it's at 3.8% and my investments are expected to return at least twice that.
However: I'm in a flood-insurance-required zone, and the insurance cost has just spiked to $3400/year -- two of my my monthly mortgage payments. This has me wondering whether it might make sense to pay off the mortgage and self-insure vs. flood risk. (I am in the 100-year-flood zone, but my sump pump kept up with infiltration OK during the 50-year flood a few years ago.)
It being Monday morning, I'm not yet awake enough to have thought this thru coherently. So if anyone's got suggestions for how to reasonably model this i'd welcome input.
Edit: Granting that this was probably a bad idea, I think it may still be worth illustrating how flood insurance -- or neighborhood/condo association fees, or other recurring costs -- factors into real cost of housing. In my case, i have specific reasons for being in this neighborhood, though not necessarily this house (others are outside the 100-year contour). If someone was shopping now, is there a good principled way to figure how much more i could have spent on a house without this risk -- or equivalently how much discount to look for to break even?
Edit: The federal flood insurance program is now willing to insure for a smaller percentage of my property's value, and some banks (including mine) are willing to consider accepting that as long as the insurance at least covers you mortgage's remaining balance. Yet another option to be considered. And, yeah, most of the value of my place is in the land.
EDIT: It may also be worth talking to your insurance agent, and bank, about the alternative of private flood insurance rather than the federal flood insurance program. My rate had gone up considerably since I first posted this question; moving to a private insurer knocked about 2/3 off my yearly premium. I'm explicitly not citing the company since I don't have enough experience with them to have any opinion on whether this was a good idea or not, or what an given bank would think about them; I'm just pointing this out as another possible option to investigate.