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Originally Posted by Indy Guy
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Indy Guy,
What you said in the link --
I completely agree.
Before our initial visit I had it in my head that the bond should be paid off. After seeing how the market there works, I changed my mind.
If an owner plans to stay in the home forever, paying off the bond may provide a good return on the investment. But for an owner who ends up selling fairly quickly, I just don't see that the ROI is there.
To me it became somewhat analogous to selling a house with a swimming pool. The number of buyers who really want it enough to pay extra for it is very limited. Then there are the buyers who see it as a nice thing that gets "thrown in" so to speak. Of course, unlike a pool, all buyers would be happy to have a paid bond. I just don't think that there are very many who would be willing to pay extra for a paid bond.
The market now is more competitive than it has been so a paid bond could be a selling point but will not necessarily provide the seller with a return on the investment if a competing home is priced lower. A paid bond may move a house more quickly but the seller may have to absorb what was expected to be a return.
I tend to be financially fairly conservative so I was actually pretty surprised that my conclusion was to just let the bond hang out there. But that is what I would do unless I planned on living in the home forever, at which point, I would have to revisit the idea. But I would probably still let it hang as long as I knew I could generate the income to cover it.
Anyone considering a home equity to pay the bond needs to run the numbers and really think hard about the wisdom of using their house as a piggy bank. I have always had a problem with the return on income tax argument. To me it is like saying, "Hey, I will give you a dollar if you give me a quarter." - or whatever. But everybody's situation is different. Run the numbers.
Another consideration in running the numbers is whether or not you would have to tap into tax-deferred money to pay debt.
Financial decisions, particularly in retirement, can turn into something like those big long story problems from school. -not much fun.
When we make financial decisions, our bottom line question is always, "What is the cost of sleep?"