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10-21-2019, 05:43 PM
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Sage
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Join Date: Aug 2009
Location: NJ, NM, SC, PA, DC, MD, VA, NY, CA, ID and finally FL.
Posts: 7,878
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Quote:
Originally Posted by retiredguy123
Thanks for getting me to look at my bond. The current balance on my 4 year old bond is about $15,000. The interest rate is 4.3 percent. When you include the admin fee, the effective rate is only 4.8 percent. That is less than I usually earn on my diversified investment portfolio, so I can't see any reason to pay it off early.
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j
Since the interest and fees on the bond are not tax deductible one would need to earn - risk free - in excess of 4.8% AFTER TAXES in order to justify not paying off the bond. At least from an income viewpoint. Of course if one pays off the bond and turns around and sells the house one would be unable to price the house sufficiently higher than competing for sale homes with bonds to recover the paid off bond principal.
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