Bond Payoff

[electricblue]

Was wondering if this is your forever home, does it make financial sense to payoff the bond? Pros and cons of doing this? Thanks...

[Bogie Shooter]

Was wondering if this is your forever home, does it make financial sense to payoff the bond? Pros and cons of doing this? Thanks...

Here is more than you want to know about this subject.

https://www.talkofthevillages.com/forums/villages-florida-general-discussion-73/bond-bond-interest-deductiblitiy-216727/?highlight=payoff+bond

https://www.talkofthevillages.com/forums/villages-florida-general-discussion-73/when-pay-off-home-bond-201443/?highlight=payoff+bond

https://www.talkofthevillages.com/forums/villages-florida-general-discussion-73/bond-payoff-38570/?highlight=payoff+bond

https://www.talkofthevillages.com/forums/villages-florida-general-discussion-73/words-wise-bonds-94972/?highlight=payoff+bond

[bandsdavis]

Was wondering if this is your forever home, does it make financial sense to payoff the bond? Pros and cons of doing this? Thanks...

Everyone's circumstances are different, but our financial adviser said we should not pay it off. He said we would make more from the investments than we would save by the payoff. After 5 years, this is proving to be accurate.

[retiredguy123]

Everyone's circumstances are different, but our financial adviser said we should not pay it off. He said we would make more from the investments than we would save by the payoff. After 5 years, this is proving to be accurate.
It would not make financial sense to borrow money at more than 7 percent interest to invest it, which is what you are doing by not paying off the bond. If you know that you will never sell the house, the best financial decision is to pay it off.

[ureout]

It would not make financial sense to borrow money at more than 7 percent interest to invest it, which is what you are doing by not paying off the bond. If you know that you will never sell the house, the best financial decision is to pay it off.


I agree.... unless you can find a financial advisor that will guarantee that you can make 4 to5% over what you are paying for the bond why take the chance....double digit % returns are not easy without taking risks....and I was always taught take the risk when you are young and still working

[Topspinmo]

Anybody that loans money they don't want you to pay it off. WHY? So the can collect the interest and fees on the payments and not deduct from the actual loan. ANY loan they making lots of money or they're not going to loan it to you, or stay in business long. This goes for financial advisors also. they in it for the fees or chipping away at your bottom line (your Money you have invested that they are in charge of).:beer3:

[Chatbrat]

Remember the rule of 72 @ 7% interest in 10+ years you have paid double the cost of the bond and its still not paid off--so, if you plan on living in your house for more than 10 years--its a no brainer--

I was taught interest keeps some people poor , while it makes other people rich.

[Blessed2BNTV]

We paid our bond off on first home in TV and recouped our money. Payoff was $17,000

We sold to a smart buyer who understood bonds because it was their second home in TV.

[Bay Kid]

I looked at the bond like paying credit card interest, which I never pay. I paid off my bond the 1st year.

[Challenger]

Everyone's circumstances are different, but our financial adviser said we should not pay it off. He said we would make more from the investments than we would save by the payoff. After 5 years, this is proving to be accurate.

get a new financial advisor--- Quickly!!!

[Chatbrat]

Honestly unless you are netting 10%, real $$, not paper profit--your adviser is not doing you any favors --the more $ he controls, the more $ he makes

[dewilson58]

Lots of good advice here.

There are a number of old threads on this topic.

Bottom line..........the answer is maybe.

[Bonny]

Both of our homes here we paid the bond off. We don't like interest.

[manaboutown]

Everyone's circumstances are different, but our financial adviser said we should not pay it off. He said we would make more from the investments than we would save by the payoff. After 5 years, this is proving to be accurate.

I wonder if the bond interest would remain nondeductible if it could be shown that the unpaid bond principal was used solely to make investments? Otherwise, and most likely, the interest paid on the bond remains nondeductible while returns on the investments are usually taxable in one way or another. Of course the more a stockbroker has to invest for a client the more he can make in commission income and management fees if that is how he is compensated.

[Villageswimmer]

We paid our bond off on first home in TV and recouped our money. Payoff was $17,000

We sold to a smart buyer who understood bonds because it was their second home in TV.


Ditto!

Some buyers understand implications of the bond. Some salespeople do not and think it's hardly worth mentioning.

[rustyp]

I wonder if the bond interest would remain nondeductible if it could be shown that the unpaid bond principal was used solely to make investments? Otherwise, and most likely, the interest paid on the bond remains nondeductible while returns on the investments are usually taxable in one way or another. Of course the more a stockbroker has to invest for a client the more he can make in commission income and management fees if that is how he is compensated.

I don't believe the IRS subscribes to the allocated pile game. Please explain where you have seen this done.

[dewilson58]

[COLOR="DarkOrange"]

I don't believe the IRS subscribes to the allocated pile game. Please explain where you have seen this done.

It's deductible until audit and even then you never know.

[justjim]

I see the Bond and the CDD'S as a good deal for the Developer and maybe not as much a deal,for the residents of The Villages. 0f course, this place may have never been developed without the CDD legislation and The Villages is not the only place in Florida this has been used. Economic development was its purpose and it has served the State of Florida well.

[Bogie Shooter]

Lots of good advice here.

There are a number of old threads on this topic.

Bottom line..........the answer is maybe.

Your right......see post #2

[Reiver]

It's not that complicated. In any purchase for which you can obtain a loan, if you can invest the money at a higher interest rate, then do that. Other wise, pay off the loan asap.

[Boomer]

Remember the rule of 72 @ 7% interest in 10+ years you have paid double the cost of the bond and its still not paid off--so, if you plan on living in your house for more than 10 years--its a no brainer--

I was taught interest keeps some people poor , while it makes other people rich.

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.

[Chatbrat]

7% was based upon a previous poster, we paid our bond one week after closing

[Boomer]

7% was based upon a previous poster, we paid our bond one week after closing

Well, alrighty then.

We didn't.

And I am sure each of us made the right decision.

[Villageswimmer]

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.


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.

[rustyp]

Let me know if your finance guy advises you to pay it off. Over the years my finance guy has proven himself to be consistent. Buy high sell low. And for that noteworthy advice I gave him a handsome commission.

[Boomer]

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.

You are right. There is no right or wrong answer. It's whatever makes sense to the individual owner who has to think it through. There is a lot of info on districtgov.org and it is all probably there somewhere, but lazy me just called and asked the balance and the interest rate.

[patfla06]

I guess it depends on a lot of factors such as bond amount, your age, how long you plan on living in the house, etc.

We debated and after a year paid it off.
Do not like having ANY debt at this age.

[JoMar]

We did not pay it off.....won't live long enough to pay the full bond. The math for us, based on returns on investments, expected life (if I live 30 years don't expect to be in this house at 103) made a payoff not a good move for us. As stated, different personal situations equal different results.

[rustyp]

We did not pay it off.....won't live long enough to pay the full bond. The math for us, based on returns on investments, expected life (if I live 30 years don't expect to be in this house at 103) made a payoff not a good move for us. As stated, different personal situations equal different results.

Is the bond like a mortgage ? Interest is paid on the unpaid balance ? Thus in the beginning little comes off the principal. Did you look at your 30 year analysis from this aspect ?

[rustyp]

Is the bond like a mortgage ? Interest is paid on the unpaid balance ? Thus in the beginning little comes off the principal. Did you look at your 30 year analysis from this aspect ?

Just did a quick calculation - if the bond is paid on the unpaid balance

- a $20000 bond at 6% for 30 years is $120/month
- at the end of 10 years you have paid $11160 in interest
- a $20000 investment at the end on 10 years at 6% yields $15816 interest (a net gain of $4657).

[perrjojo]

Pay off or not pay off? Do whatever helps you sleep at night. There is no one size fits all answer

[Arctic Fox]

If this is your forever home, does it make financial sense to payoff the bond? Pros and cons of doing this?

Any advisor worth his salt will tell you that he needs to know a lot more about your financial situation before he can come to a decision.

In other words, for some people it will make sense to pay off the bond; for others it will not.

We paid ours off immediately because it was one less thing to bother with and because we couldn't find an "investment" that would guarantee us the 7% over the remaining life of the bond. Your situation may be different.

[golfing eagles]

A lot of "voodoo" economics floating around this thread.

First of all, I agree that everyone should do what they think is right for their situation.

I chose not to pay it off, and here is why----

My bond is $28,742 for which I pay $2,004 for 30 years = $60,120

The same $28,742 invested in the stock market for 30 years at the 100 year statistical ROI of 8% ends up being $289,221. (Do the math) Food for thought for those that claim it is a "no-brainer" to pay it off, or suggest that a financial advisor is somehow an idiot for advising a client not to pay it off. But once again, it remains a personal decision for each individual to make.

[Barefoot]

We paid ours off immediately because it was one less thing to bother with ....
We paid ours off for the same reason.
Our resale home didn't have a high bond, and we didn't like paying 6% interest every year.

[golfing eagles]

We paid ours off for the same reason.
Our resale home didn't have a high bond, and we didn't like paying 6% interest every year.

Again, an individual decision. I preferred paying 6% simple interest and collecting 8% compound interest to the tune of $229,101 in profit. If I live that long, I'll die the next day and have one heck of a wake. You're invited---there will be unlimited lobster!

[Fraugoofy]

Was wondering if this is your forever home, does it make financial sense to payoff the bond? Pros and cons of doing this? Thanks...
We bought a pre owned patio villa that had a bond balance of $4200 in 2012. We were paying about $800 a year toward the bond. After one year we paid off the bond and now invest the $800 a year to make money. We don't have to pay the administration fee for the bond every year now either. For us it made sense to pay it off. We still own that patio villa and intend to keep it as a rental for at least 5 more years. Good luck with your decision.

Sent from my SM-N910R4 using Tapatalk

[mickey100]

Any advisor worth his salt will tell you that he needs to know a lot more about your financial situation before he can come to a decision.

In other words, for some people it will make sense to pay off the bond; for others it will not.

We paid ours off immediately because it was one less thing to bother with and because we couldn't find an "investment" that would guarantee us the 7% over the remaining life of the bond. Your situation may be different.

That's a good point. You may be able to get 7 or 8% on an investment for awhile, but there is no guarantee you will have that for 20 or 30 years. And another point is that you will be taxed on that investment. On the other hand, the bond interest is not tax deductible. Lastly, at our age, we will most likely not have 100% of our investments in stocks, which is where you'd hope to get an average of 8% return. Perhaps 50% of our investments might be in quality bonds or fixed income vehicles, which will earn considerably less than 8%.

You can go to the districtgov.org website and there is an area where they show the amortization tables for the bonds. For example, if you live in district 10, unit 187, you have a 5.9999% interest rate on the a $22,851 bond, and over the life of the bond, you will pay $1735 per month, for a total of $52,063.

[golfing eagles]

That's a good point. You may be able to get 7 or 8% on an investment for awhile, but there is no guarantee you will have that for 20 or 30 years. And another point is that you will be taxed on that investment. On the other hand, the bond interest is not tax deductible.

You can go to the districtgov.org website and there is an area where they show the amortization tables for the bonds. For example, if you live in district 10, unit 187, you have a 5.9999% interest rate on the a $22,851 bond, and over the life of the bond, you will pay $1735 per month, for a total of $52,063.

What does the interest on the bond not being tax deductible and investment income being taxed have to do with anything? Unless you pay off the bond in monopoly money, the income you used to pay it WAS taxed.

And BTW, the historical ROI in the stock market over the last 100 years is about 8%, so on a 30 year investment, you should be pretty close to that average, not just "for a while"

[ColdNoMore]

For some people, not having a bond/debt gives them peace of mind and they may also be trying to maximize...what they pass on to their heirs.

For others, having the additional cash in the bank for unexpected bills or longevity (we can all hope :D )...gives them peace of mind.

As many others have said, it really does boil down to an individual choice...and what each person thinks is best for them.

There is no right/wrong choice...that fits all. :shrug:

[golfing eagles]

For some people, not having a bond/debt gives them peace of mind and they may also be trying to maximize...what they pass on to their heirs.

For others, having the additional cash in the bank for unexpected bills or longevity (we can all hope :D )...gives them peace of mind.

As many others have said, it really does boil down to an individual choice...and what each person thinks is best for them.

There is no right/wrong choice...that fits all. :shrug:

Sounds awfully close to 4 this week:22yikes::22yikes::22yikes:

[ColdNoMore]

Sounds awfully close to 4 this week:22yikes::22yikes::22yikes:

Nope.

3:1. :1rotfl: :1rotfl:

[golfing eagles]

.

First of all, I agree that everyone should do what they think is right for their situation.



As many others have said, it really does boil down to an individual choice...and what each person thinks is best for them.

There is no right/wrong choice...that fits all. :shrug:

Are you sure it's not 4:0?????:wave::wave::wave:

[mickey100]

What does the interest on the bond not being tax deductible and investment income being taxed have to do with anything? Unless you pay off the bond in monopoly money, the income you used to pay it WAS taxed.

And BTW, the historical ROI in the stock market over the last 100 years is about 8%, so on a 30 year investment, you should be pretty close to that average, not just "for a while"

Someone posted making a certain profit on a stock market investment, but didn't account for taxes. So the point is, one may have to deduct 15 or 20%, or whatever bracket a person is in, to show the true earnings. And BTW, as any seasoned investor is aware, past performance is no guarantee of future earnings. Stock returns have varied greatly by decade. You may get lucky and be in a decade or two of high earnings, or you may hit negative territory. Some investment gurus have said the says of double digit returns are a thing of the past, and we'll be lucky to get 6% on our investments over time. The thing is, no one has a crystal ball. If we did we would have bought Apple stock when it was $12/share.

[golfing eagles]

Someone posted making a certain profit on a stock market investment, but didn't account for taxes. So the point is, one may have to deduct 15 or 20%, or whatever bracket a person is in, to show the true earnings. And BTW, as any seasoned investor is aware, past performance is no guarantee of future earnings. Stock returns have varied greatly by decade. You may get lucky and be in a decade or two of hight earnings, or you may hit negative territory. Some investment gurus have said the says of double digit returns are a thing of the past, and we'll be lucky to get 6% on our investments over time. The thing is, no one has a crystal ball. If we did we would have bought Apple stock when it was $12/share.

And hence the term "risk tolerance" Yes, my numbers were pre-tax, but I'd rather have 80% of something than 100% of nothing. Now, if someone doesn't anticipate the cash flow to pay the bond and interest yearly, has the $$$ right now, and might be tempted to spend it on something else, I'd pay it off too.

[Arctic Fox]

I preferred paying 6% simple interest and collecting 8% compound interest to the tune of $229,101 in profit.

May we assume, then, that you have remortgaged your home (at the current 30-year fixed rate of around 4%) and put all of the money into the stockmarket?

[golfing eagles]

May we assume, then, that you have remortgaged your home (at the current 30-year fixed rate of around 4%) and put all of the money into the stockmarket?

In other words, may you assume I'm an idiot???? No, you may not:1rotfl::1rotfl::1rotfl:

[Arctic Fox]

May we assume, then, that you have remortgaged your home (at the current 30-year fixed rate of around 4%) and put all of the money into the stockmarket?

In other words, may you assume I'm an idiot???? No, you may not:1rotfl::1rotfl::1rotfl:


Yes, funny how the math changes so quickly, and that "no brainer; should get close to 8% over thirty years" suddenly isn't the panacea that it was several times earlier in this thread.

[golfing eagles]

Yes, funny how the math changes so quickly, and that "no brainer; should get close to 8% over thirty years" suddenly isn't the panacea that it was several times earlier in this thread.

The math has not changed at all. Let's try this again ---
the 100 year average yearly returns on investment in the stock market is just about 8%. There are up years and down years, but it is still an 8% return averaged over 100 years. If you are looking to invest for 1 or 2 years, don't count on 8%, you may be down 40%. But a thirty year investment is more than likely to approximate the last 100 years.

Next, I hope you see the huge difference between mortgaging a property you already own to put it in the market for 30 years and deciding whether or not to pay off a NEWLY INCURRED expense of a bond. A $500,000 mortgage, 30 years at 4% will cost you about $2400/month, so you would needs steady up years just to generate the cash flow to cover that. A $25,000 bond at 6% for 30 years costs $150/ month, so you are comparing apples and oranges

Now if I already had a $500,000 mortgage, was working and could easily meet the payments, was 25 years old and came into a $500,000 lottery ticket, that money would be going straight into a targeted date fund and remain untouched for 30 years.

Yes, the math is the same.

[Barefoot]

Again, an individual decision. I preferred paying 6% simple interest and collecting 8% compound interest to the tune of $229,101 in profit. If I live that long, I'll die the next day and have one heck of a wake. You're invited---there will be unlimited lobster!
The chance of me surviving a 57 year who plans to live for 30 years are slim.
I'll take my lobster now, steamed please. :evil6:

[Chatbrat]

Broiled, stuffed with crabmeat & roe

[Chi-Town]

When buying here there was little mention that the bond was paid off. I noticed in the sales sheet that it was listed on the features section, but not knowing anything about buying a house with a bond I never considered it a sales point. It was like OK, that's nice.

I would never pay off a bond early thinking that you would get it or a portion back in the sell price.



Sent from my SM-N910V using Tapatalk

[Arctic Fox]

I hope you see the huge difference between mortgaging a property you already own to put it in the market for 30 years and deciding whether or not to pay off a NEWLY INCURRED expense of a bond. A $500,000 mortgage, 30 years at 4% will cost you about $2400/month, so you would needs steady up years just to generate the cash flow to cover that. A $25,000 bond at 6% for 30 years costs $150/ month, so you are comparing apples and oranges

If you choose to use as an example a huge mortgage then, of course, the numbers will be unsupportable.

[golfing eagles]

If you choose to use as an example a huge mortgage then, of course, the numbers will be unsupportable.

And I thought size doesn't matter :1rotfl::1rotfl::1rotfl:

[ColdNoMore]

Are you sure it's not 4:0?????:wave::wave::wave:

Recognizing that 'most' of the time in life, timing is everything...I'm going to have to dissent in this particular instance.

While you beat me to the keyboard, the recognition of what you posted became obvious to me...a long time ago.

Therefore, in the spirit of compromise I'm willing to go...



3.5:.5 :D


:ho:

[golfing eagles]

Recognizing that 'most' of the time in life, timing is everything...I'm going to have to dissent in this particular instance.

While you beat me to the keyboard, the recognition of what you posted became obvious to me...a long time ago.

Therefore, in the spirit of compromise I'm willing to go...



3.5:.5 :D


:ho:

fair enough. Still a record:1rotfl::1rotfl::1rotfl:

[Boomer]

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.


You are right. There is no right or wrong answer. It's whatever makes sense to the individual owner who has to think it through. There is a lot of info on districtgov.org and it is all probably there somewhere, but lazy me just called and asked the balance and the interest rate.

- - - - -
Hi again, Villageswimmer,

I finally took the time this afternoon to delve into districtgov.org where I found the amortization tables. We are in District 7 where our interest rate is 4.25. Our amortization is not quite but almost to the point where half of it is going to the principal. We are the second owners.

We knew about the bond when we bought and knew we would not pay it off because we knew we would not keep the house forever.

Until this thread, I had no idea there could be such a difference in the interest rates on the bonds. When we chose the house, we knew the remaining bond amount, but did not ask about the interest rate. We really like our location in District 7, but had no idea the interest rate on the bond would be rather significantly lower than some.

When it comes to the bond, buyers need to know what they don't know, and as this thread is showing, there is more to it than to pay or not to pay it off. Buyers who want to know more about the bond and all it entails might want to track down those tables and rates by district on districtgov.org.

[Arctic Fox]

A $500,000 mortgage, 30 years at 4% will cost you about $2400/month, so you would needs steady up years just to generate the cash flow to cover that. A $25,000 bond at 6% for 30 years costs $150/ month.

I guess we're just viewing it from opposite directions.

You ask why spend $25k to pay off a 6% loan when you could invest that money in the stock market at 8%.

I ask why you would keep paying 6% when you could borrow against the house at 4%.

So how about this for the best of both worlds: borrow $35k against the house - monthly repayment over 30 years would be slightly less than currently paid on the 6% bond - use $25k to pay off the bond, leaving you $10k "free" cash to invest in the stock market.

[golfing eagles]

I guess we're just viewing it from opposite directions.

You ask why spend $25k to pay off a 6% loan when you could invest that money in the stock market at 8%.

I ask why you would keep paying 6% when you could borrow against the house at 4%.

So how about this for the best of both worlds: borrow $35k against the house - monthly repayment over 30 years would be slightly less than currently paid on the 6% bond - use $25k to pay off the bond, leaving you $10k "free" cash to invest in the stock market.

Sold! Many more ways than one to skin a cat

[Nucky]

Sold! Many more ways than one to skin a cat

You are certainly rite. I like interest coming to me and live to not pay interest to anyone for anything ever.:$:

[RickeyD]

I guess we're just viewing it from opposite directions.



You ask why spend $25k to pay off a 6% loan when you could invest that money in the stock market at 8%.



I ask why you would keep paying 6% when you could borrow against the house at 4%.



So how about this for the best of both worlds: borrow $35k against the house - monthly repayment over 30 years would be slightly less than currently paid on the 6% bond - use $25k to pay off the bond, leaving you $10k "free" cash to invest in the stock market.



Until you need to sell your house. With the bond intact it is then assigned to the new owner. Take out a loan and you eat the whole bond.

[Arctic Fox]

Until you need to sell your house. With the bond intact it is then assigned to the new owner. Take out a loan and you eat the whole bond.

OP was for a "forever" situation, but that's a valid point RickeyD

[rustyp]

When buying here there was little mention that the bond was paid off. I noticed in the sales sheet that it was listed on the features section, but not knowing anything about buying a house with a bond I never considered it a sales point. It was like OK, that's nice.

I would never pay off a bond early thinking that you would get it or a portion back in the sell price.



Sent from my SM-N910V using Tapatalk

I understand your logic however that's a two sided coin. When I purchased our house I had rented here for several years. I was educated about the bonds. There was a glut of used homes on the market at the time. I told the agent only show me houses with the bond paid off. Also my experience was the price was higher than a house with a bond but perhaps not quite the full value of the original face value of the bond. Thus you might conclude by this scenario that a house without a bond was more marketable. Remember a house is only worth what you sell it for. It's worthless if it isn't selling.

[Barefoot]

Until you need to sell your house. With the bond intact it is then assigned to the new owner. Take out a loan and you eat the whole bond.While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.

[Boomer]

When buying here there was little mention that the bond was paid off. I noticed in the sales sheet that it was listed on the features section, but not knowing anything about buying a house with a bond I never considered it a sales point. It was like OK, that's nice.

I would never pay off a bond early thinking that you would get it or a portion back in the sell price.



Sent from my SM-N910V using Tapatalk



Good advice, Chi-Town,

Of course, there are those who have recouped the bond pay-off cost when they sell, but depending on that might be taking more of a gamble than putting the money directly into a handful of boring, solid, dividend paying stocks.

I do think what can happen when a house with a paid off bond is for sale is that "no bond" can become the scales-tipper if a buyer likes two houses equally much but only one has a paid bond.

But......depending on the market, a seller with a paid bond often feels the house has to list for a higher amount than its competition--which might fly.....or not. Time is money in real estate or in the market and that money can go either way.

What started me into this thread this time is that I truly believe in the whatever-lets-you-sleep-at-night philosophy when it comes to investing money. The bond decision is an individual one to make and this thread is is a sort of informal study of behavioral economics, a field which I find fascinating.

(Also, I got way into this thread while I was riding shotgun for hundreds of miles--Me and My iPad.)

Anyway, this is one of the better bond threads I have seen around here. I love it when I learn something. And yesterday, I learned how to look up all the interest rates for all the bonds in all The Villages. I had thought everybody's was 4.25% like ours.

[biker1]

Exactly. If someone is looking to pay cash, the issue is do they want additional money in the house or would they prefer to pay the interest, principle, and management fee for the bond each year (essentially financing a portion of the house). For someone financing the house, the higher price (and mortgage payments) of a house with a paid off bond will be offset by not having to pay the interest, principle and management fee of the bond. The annual cash flow should, in theory, be very similar.

While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.

[Packer Fan]

A lot of "voodoo" economics floating around this thread.

First of all, I agree that everyone should do what they think is right for their situation.

I chose not to pay it off, and here is why----

My bond is $28,742 for which I pay $2,004 for 30 years = $60,120

The same $28,742 invested in the stock market for 30 years at the 100 year statistical ROI of 8% ends up being $289,221. (Do the math) Food for thought for those that claim it is a "no-brainer" to pay it off, or suggest that a financial advisor is somehow an idiot for advising a client not to pay it off. But once again, it remains a personal decision for each individual to make.

Sorry to say I disagree with this. You have to assume if you do this that you now take the $2,004 you save by not having a bond payment and dollar cost average it into the stock market at 8% which gives you $248,900 plus the $31,378 you save paying off the bond = $280,278. So basically it does cost you a little bit. However, my experience has been that guaranteeing 8% is crazy, especially in a rising rate bond environment and the stock market at current valuation. Overall, I have to agree the decision is a wash financially, but it does come down to the fact if you pay the bond off, it is a guaranteed return.

I paid mine off right away, but I have a rental, so I can depreciate it as part of the home cost. Slightly different calculation.

[RickeyD]

While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.


Easily rectified by advertising to pay off the bond to a willing buyer. Win, win.

[RickeyD]

OP was for a "forever" situation, but that's a valid point RickeyD

If there is anything I've learned in my lifetime is this...there is no forever

[perrjojo]

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

[rustyp]

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

No it is as simple as this - you save 100%of the interest owed if you pay off the bond. Now you can complicate this buy betting on the cum schemes.

[ColdNoMore]

No it is as simple as this - you save 100%of the interest owed if you pay off the bond. Now you can complicate this buy betting on the cum schemes.

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

[Reiver]

I am laughing at the detail involved in some of these ideas.
If you know how to invest your money, you don't need to ask about paying off the bond or not.
If you don't, this probably isn't the time and place to learn.
So the questions are: Do you want to have an annual payment or some cash in hand right now?
And if you're going to jump from house to house through the years, do you want to keep spending the money every time?

[golfing eagles]

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

:agree::agree: I agree. Now I'm REALLY starting to get scared:1rotfl::1rotfl::1rotfl:

[Arctic Fox]

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

yes, but after that it's all money in the bank!

[rustyp]

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

///

This is simple also - you just described the case in which one can not afford to pay off the bond.

[ColdNoMore]

///

This is simple also - you just described the case in which one can not afford to pay off the bond.

'Afford' doesn't necessarily have anything to do with it.

Under your logic and implication that some people can afford to pay off the bond and others can't, also means that same person who can 'afford' to pay off the bond...can also easily afford to pay the interest on it too.

Leaving them with more cash on hand.

What some people seem to be forgetting, is that you're not 30 years old anymore...and planning for your retirement.

How you manage your money at this stage in life, is a whole lot different than when you are planning...to get to this stage of life.

If people do some research, they will see that two of the biggest things affecting retirees...is living longer than expected and expenses not being reduced as much as expected.

Once again though...everyone has to make their own choice.

[ColdNoMore]

:agree::agree: I agree. Now I'm REALLY starting to get scared:1rotfl::1rotfl::1rotfl:

3.5:1.5 :1rotfl:


:D

[golfing eagles]

3.5:1.5 :1rotfl:


:D

isn't that 4.5:0.5?????:1rotfl::1rotfl::1rotfl:

[ColdNoMore]

Paying off the bond, is not a lot different than paying cash for a house here in TV...or getting a mortgage.

While it seems intuitively to be a no-brainer to pay cash and avoid the mortgage payment...that isn't necessarily the case.

Should You Pay Cash for a Home Instead of a Loan | Money (http://time.com/money/3939975/should-you-ever-pay-cash-for-a-home/)

How you pay for your home is a very personal decision and paying in all cash will likely work for some people but not for others. This generally makes sense if the home’s price does not subtract a significant portion of your liquid assets and/or the interest rate you would pay on a mortgage is higher than what you could earn on other investments. It’s important to properly assess your financial situation and long-term investment strategies, the drawbacks as well as the benefits.

I personally chose a middle ground.

When I bought here in 2011, I decided that a small mortgage was by far the better choice for me.

I still do consulting work at times and therefore the mortgage deduction...really helps in my tax bracket.

In addition, the interest rates were historically low and the extra amount in the bank with investments paying much more than the loan %...made the choice easier.

I have a neighbor that liked to brag about paying cash for their home (about 10 years ago), but one spouse went back to work a few years ago, because they became concerned that their 'nest egg' (small pension/SS/savings)...was being depleted faster than anticipated.

Some of us have nice, solid pensions and don't depend on SS...but others have retired based on their acquired savings and SS.

I golf with a guy that was whining recently about the addition of an expensive drug he just started taking and the price of his co-pays being significant. Since I knew from his ridiculing others for not paying off their bonds in previous conversations, whereas he had, I asked him if he knew then what he knows now...would he still pay the bond?

His answer was..."probably not."


It really is a personal choice and I'm not going to criticize someone...for whichever way they decided to go. :shrug:

[Love2Swim]

I know when we purchased our home 11 years ago,we couldn't make up our mind whether or not to pay off the bond, but we decided we would pay it off. We figured if we decided to move, it may be a tipping point. The Villages sales agents said having the bond paid off wouldn't cause our home to increase in value, as far as asking price, but if there were two homes priced the same, one had the bond paid and the other didn't, obviously the house with the bond paid off is the better buy. At the time, the break even point for our home was 11 years. In other words, if we made yearly bond payments for, after 11 years, we would have paid roughly $16,000, which was the price of our bond, but it would have been mostly interest, and we would still have owed many more years of bond payments. I'm happy we paid off the bond initially, and saved all that interest. We are now thinking about downsizing, and the real estate people say that having no bond is a selling point for at least some of the (educated) buyers.

[biker1]

The decision is relatively easy if you have any analytic skills and can make some reasonable assumptions. Paying non-deductible interest is generally a bad idea.

Paying off the bond, is not a lot different than paying cash for a house here in TV...or getting a mortgage.

While it seems intuitively to be a no-brainer to pay cash and avoid the mortgage payment...that isn't necessarily the case.

Should You Pay Cash for a Home Instead of a Loan | Money (http://time.com/money/3939975/should-you-ever-pay-cash-for-a-home/)


I personally chose a middle ground.

When I bought here in 2011, I decided that a small mortgage was by far the better choice for me.

I still do consulting work at times and therefore the mortgage deduction...really helps in my tax bracket.

In addition, the interest rates were historically low and the extra amount in the bank with investments paying much more than the loan %...made the choice easier.

I have a neighbor that liked to brag about paying cash for their home (about 10 years ago), but one spouse went back to work a few years ago, because they became concerned that their 'nest egg' (small pension/SS/savings)...was being depleted faster than anticipated.

Some of us have nice, solid pensions and don't depend on SS...but others have retired based on their acquired savings and SS.

I golf with a guy that was whining recently about the addition of an expensive drug he just started taking and the price of his co-pays being significant. Since I knew from his ridiculing others for not paying off their bonds in previous conversations, whereas he had, I asked him if he knew then what he knows now...would he still pay the bond?

His answer was..."probably not."


It really is a personal choice and I'm not going to criticize someone...for whichever way they decided to go. :shrug:

[ColdNoMore]

The decision is relatively easy if you have any analytic skills and can make some reasonable assumptions. Paying non-deductible interest is generally a bad idea.

Over-simplification is what is easy.

Even those who have excellent analytical skills can disagree...due to individual circumstances.

Life expectancy is always an unknown and all of the "assumptions" in the world...doesn't change that.

[rustyp]

'Afford' doesn't necessarily have anything to do with it.

Under your logic and implication that some people can afford to pay off the bond and others can't, also means that same person who can 'afford' to pay off the bond...can also easily afford to pay the interest on it too.

Leaving them with more cash on hand.

What some people seem to be forgetting, is that you're not 30 years old anymore...and planning for your retirement.

How you manage your money at this stage in life, is a whole lot different than when you are planning...to get to this stage of life.

If people do some research, they will see that two of the biggest things affecting retirees...is living longer than expected and expenses not being reduced as much as expected.

Once again though...everyone has to make their own choice.

No problem - I'm not losing sleep at night over $20G's. Good luck to you.

[ColdNoMore]

No problem - I'm not losing sleep at night over $20G's. Good luck to you.

Neither do I...but there are some that do.

In post #62, you stated that you only looked at homes with the bond paid off...so there must have been a reason. :shrug:

Good luck to you also.