Quote:
Originally Posted by Boomer
Chatbrat,
7%???
Is that number for the sake of your Rule of 72 example or is it actually someone's interest rate on the bond?
Our rate of interest is at 4.25 % and while I realize rates can change, that is nowhere near 7%.
New Villagers reading these many threads might come away confused at best or knee-jerk reacting at worst.
There is not one "no brainer" answer to that eternal question about whether or not to pay off the bond.
There are those who just might want to do something else with that chunk of change it would take to pay off the bond. Owners with unpaid bonds should look at their annual cost and factor in how that makes them feel. Answers will vary and that is as it should be.
There are those among us who have perfectly good brains who might decide to use them differently...........
Catching a boring, solid dividend paying stock at the right time can result in a dividend sometimes upward of 4%, and some companies annually increase the dividend payout.
Additionally, catching an individual stock just right can hold the potential for being able to capture a tidy gain in time. Taxes on gains and dividends are usually easier on investors than ordinary income tax.
Individual investors come in all types, some more adventurous than others. There are investors who might not want to give up having options with the money it would take to pay off the bond. And before somebody pounces, may I say I completely understand there are also excellent reasons for choosing to pay off the bond in certain circumstances -- certain being the operative word.
I do not intend to be arrogant. I am not trying to act like I know best for everybody. All I am saying is there are many people who have plenty of brains who, for whatever reasons, do not choose to pay off the bond.
Everybody's bird in the hand is not the same kind of bird.
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Ours was 6.125%. Yes--not THAT far from 7%. The rates do not change throughout the 30 yr bond life. Look at your amortization schedule. See what the real cost will be. Don't make a decision based on posts here.