[Kenswing]

Originally Posted by CoachKandSportsguy

For round numbers, lets say the bond is 10% of construction price.. $30K on a $300K house, for a total of $330K. Lets say the house price increase is 4% annually from $300K. 4% compounded over the next three years is a 12.5% increase, or $337K.

So three years of modest price increases will return the cost of the bond paid off. After 5 years of living in the house the value will be $365K, which easily recoups the price of the bond, and more.

What you won't recoup is the interest you pay for not paying the bond off early, so I don't know what math you are looking at, but from a simple financial point of view, only a flipper after a year or two won't get his money back, unless the house sells significantly above the total combined cost, which is always possible.

sportsguy

But don't you need to take into account the opportunity cost? Right now the interest rate on a bond is 3.67%. That's almost as good as a free loan. Instead of paying that off why not invest in something that pays more?