Pay Off Bond or Pay Down Mortgage?

[Road-Runner]

After reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.

Just curious if others have gone through the same decision process.

Thanks, Jim

[asianthree]

Paying down mortgage is big money saver, on interest. However some companies will reduce the monthly payments for a fee. Citizens First does for
175. But there are some lenders that will not.
Bond if you r planning on selling in 5 or 6 years, don’t pay off the bond.

However your financial person can put in better perspective for you

[dewilson58]

Bond is at a higher rate of interest.......mostly with the Admin Fee.

Some say don't pay off bond because you will not get it back at sale. I disagree.
If you ain't planning on selling, this argument is mute.

:popcorn:

[retiredguy123]

Bond is at a higher rate of interest.......mostly with the Admin Fee.

Some say don't pay off bond because you will not get it back at sale. I disagree.
If you ain't planning on selling, this argument is mute.

:popcorn:
I agree, but sometimes plans change. As soon as you pay off the bond, the cash out value of your house will immediately decrease. You will only come out ahead if you actually keep the house for about 8 years or longer as "planned".

[Bogie Shooter]

After reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.




Just curious if others have gone through the same decision process.

Thanks, Jim

Do a search on here for Bond payoff. To get hundreds of helpful (?) opinions.

[Road-Runner]

Do a search on here for Bond payoff. To get hundreds of helpful (?) opinions.

I'll do that, thanks!

[charlieo1126@gmail.com]

I’m selling and closing on my 6 th home in villages , I’ve never paid the bond off ( never) some people will try to offer you less money they are people who need to be ignored, most buyers couldn’t care less the longest any home I’ve sold here took was 22 days and that was an expensive golf course home . I have had homes and condos I’ve lived in longer but I would never put more then 20% down let the profit in house ride put the money that your trying to pay down the mortgage into a safe index fund like Vanguard you’ll do better then paying down mortgage

[Stu from NYC]

What is interest rate on bond and mortgage?

Most people seem to move at least once after moving here so generally popular wisdom is not paying off the bond.

[tophcfa]

If the interest rates are similar it is a no brainer to pay off the bond since the interest on the mortgage is tax deductible.

[Stu from NYC]

If the interest rates are similar it is a no brainer to pay off the bond since the interest on the mortgage is tax deductible.

Wonder how many people deduct interest on bond and get away with it?

[JohnN]

We have planned to keep this home for a long time and paid off the bond.
The bond interest rate was quite a bit higher, so we paid that off first.
If we were not keeping the home for long (I don't know, 5 years or less) , we'd have paid the mortgage down.

[Stu from NYC]

We have planned to keep this home for a long time and paid off the bond.
The bond interest rate was quite a bit higher, so we paid that off first.
If we were not keeping the home for long (I don't know, 5 years or less) , we'd have paid the mortgage down.

We have been in this house just over a year and will probably be herer for the rest of our lives. Would kind of like more space but will make do.

Give it another year or so and if we still think we will stay will definitely pay off the bond.

[retiredguy123]

Wonder how many people deduct interest on bond and get away with it?
I think that most retirees in The Villages do not have enough deductions to make it worth doing an itemized tax return, and so they use the standard deduction anyway.

[Garywt]

My bond interest is low as is the payment so I just pay it as part of escrow with the mortgage. If paying the bond lowers the payment more than paying the mortgage down then do it that way. I think we will have our northern house a lot longer than 2 years.

[Stu from NYC]

I think that most retirees in The Villages do not have enough deductions to make it worth doing an itemized tax return, and so they use the standard deduction anyway.

Wonder what percentage of villagers actually have a mortgage which would make it more likely to itemize.

[CoachKandSportsguy]

My advice is to pay off the bond, non tax deductible interest, and recoverable in 5-6 years with average 2-3% inflation in the house price. Especially if you want to retire with minimum expenses and want to live in the house for 5 or more years, which is an ideal financial goal. BUT we don't know your financial asset strength, so if you have the full amount and that won't impact your retirement or life style, yes. However, to get the early payoff cash back, you need to have the house sale price to appreciate above your cost+ bond amount by sale time.

The other argument, the reason why people don't pay off the bond early is that new or recent construction appears cheaper as the cost of the bond isn't included in the house sale price, as listed on the county records. Adding the bond to a 1 year old house listed as purchased at $355 K a year ago, and then adding a $30K bond is an instant 10% appreciation of asking price against a 2-3% annual appreciation looks overpriced. . .

Optics of comparison for naive or impulsive buyers, as most house purchases are an emotional decision, with the backstop of the mortgage affordability.. . . the bond doesn't pay into that equation for lenders, and buying emotions . . . behavioral finance 101. . . Amazon shipping is not free, its just bundled in your price, but you can't see it, so you really don't know what it is. . . could be a percentage of the price, which is averaged out over all items forecast to be sold. .

finance guy

[cj1040]

We sold a home up north for much more than our new home here and it had been paid off for many years. We could easily have paid cash for this house but with a mortgage of 2.75 percent we decided to invest our house money and we never plan to pay off either the bond or this house!!! We are in our 70s so the 30 year mortgage will last longer than we will !!!

[LuvtheVillages]

Wonder what percentage of villagers actually have a mortgage which would make it more likely to itemize.

With the increased standard deduction of $27,400, and today’s low interest rates, it doesn’t pay to itemize even with a mortgage.

[Garywt]

With the increased standard deduction of $27,400, and today’s low interest rates, it doesn’t pay to itemize even with a mortgage.

I still itemize, 2 mortgages, 2 tax bills and more. I think I was over $50k in deductions this year.

[GOLFER54]

I called James and he said, “ Pay off Bond .”

[Northerner52]

Newer bonds have lower interest rates. Realtors suggest not paying it off

[Villages Kahuna]

Pay off your mortgage. Paying off your bond will not make your house sell any faster.

[tsmall22204]

Paying off the bond is saving of the high annual interest rate of, I think, around 6 percent. I paid off my bond because of that, not for resale value. This is .y forever home.

[kidnerkim]

I agree, but sometimes plans change. As soon as you pay off the bond, the cash out value of your house will immediately decrease. You will only come out ahead if you actually keep the house for about 8 years or longer as "planned".

Why would cash out value of your home decrease? Bond paid off is a selling point ! We are looking at homes & are NOT looking south of 44 due to the very large bonds. I have even heard of people making offers on homes & offering less than the asking because of the bond. The interest rate is higher than mortgage rates right now so I would pay off.

[Stu from NYC]

I called James and he said, “ Pay off Bond .”

James?

[noslices1]

Just pay cash for your house and then pay cash for the bond. You won’t have any monthly charges, or the big bond pay off when you pay your taxes. Easy Peezy.

[dewilson58]

Newer bonds have lower interest rates. Realtors suggest not paying it off

Don't forget to figure in the Admin Fee to get your Effective Interest Rate......ain't that cheap.

[Tmarkwald]

I've struggled as well. Then I looked at investments, and I'm doing about 16% a year vs a 2.8% mortgage. Doesn't make sense to pay off the mortgage. Even though I no longer have enough write offs to need the mortgage interest deduction, it still doesn't make sense.

So, balance what your money can do for you in the market. The increase in home values in TV - historically 6% or so, will probably go up to 10% annual as so many people are moving to Florida and we are a magnet in TV.

It's a tough call..

[NY2TV]

When first buying the house, I put more of a down payment toward the mortgage rather than paying off the bond because the bank gave me a lower interest rate for putting a larger down payment. If that had not been the case, I would have paid off bond since rate was much higher than mortgage rate. I recently paid off bond because savings account rates are so low, it was worth it to take money out of savings. I chose bond instead of mortgage because bond rate is higher and not tax deductible. And my mortgage payment will go down whereas if I had paid down mortgage I wouldn't have seen savings until the last year when it got paid off early.

[terenceanne]

Although it may not be financially sound - to have zero debt is comforting and a nice position to be in. Something financial people never take into account is peace of mind.
Get rid of all your debt including the bond. If you can afford it of course.

[dewilson58]

Although it may not be financially sound - to have zero debt is comforting and a nice position to be in. Something financial people never take into account is peace of mind.
Get rid of all your debt including the bond. If you can afford it of course.

Very Financially Sound.
:MOJE_whot:

[richardc1947]

The answer is yes if you plan to live there for more than 4 or 5 years and save the 6% +/- interest. No, if you are going to resell it in just a few years in that it will bring very little more in the sales price, albeit it might be a quicker sale.

[GRACEALLEMAN]

THERE ARE TOO MANY CHOICES HERE TO BUY A HOME WITH A BOND. BUY A NICE USED HOME...(THERE ARE 1000S AVAILABLE. DONT BE FOOLED INTO BUYING NEW.)
ITS your life energy your are spending on a stupid "TAX" CALLED a BOND.

[dewilson58]

THERE ARE TOO MANY CHOICES HERE TO BUY A HOME WITH A BOND. BUY A NICE USED HOME...(THERE ARE 1000S AVAILABLE. DONT BE FOOLED INTO BUYING NEW.)
ITS your life energy your are spending on a stupid "TAX" CALLED a BOND.

:what:

[willbush]

Paying off the bond which interest/admin fee is high; after seeing it barely moved in amount left just like a mortgage we paid it off after the first year; huge savings on our tax bill where you pay it yearly

[petsetc]

Cash FLOW is King and offers the most/best flexibility.

My opinion is do not pay off bond for all the reasons previously stated and also, I suspect your current return on the money you would use to pay it off is as good or better than the bond rate all in.

A 30 year mortgage at today's rates is very cheap money-I just refinanced myself and never plan to pay extra on it.

Last thought - Cash FLOW is king.

FWIW

[Hiltongrizz11]

Bond is at a higher rate of interest.......mostly with the Admin Fee.

Some say don't pay off bond because you will not get it back at sale. I disagree.
If you ain't planning on selling, this argument is mute.

:popcorn:

Dude, this isn't even an argument. You just shared your opinion don't act so scientific

[dewilson58]

Dude, this isn't even an argument. You just shared your opinion don't act so scientific

:blahblahblah:
Pay or not pay are all opinions............what is best is an opinion.
Not to payoff & invest is an opinion.........must take into personal preference of debt.
Payoff & live debt-free is an opinion.
Never did like science class.
:ho:

[jerseyclone]

Payoff bond , my interest rate was 7% plus a maintenance fee of $90/year. The villages is getting rich off this scam.

[dewilson58]

Payoff bond , my interest rate was 7% plus a maintenance fee of $90/year. The villages is getting rich off this scam.

FYI: The Villages is not getting your payments. :shocked:

[JeepsterGlenn]

Keep in mind that the bond can be paid off after the house sale. I waited a year to see the annual cost and decided to pay it off before the cutoff date for next year’s bond payment. I had a year to think it over and confirm how long I wanted to stay in my home and ended up only paid one year’s interest.

[carol805]

Check here to see what you ultimately pay by not paying off bond. (From districtgov.org)

Amortization Schedules - Sumter (https://www.districtgov.org/departments/Finance/amortization_sumter.aspx)

[DAVES]

After reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.

Just curious if others have gone through the same decision process.

Thanks, Jim

My two cents worth-for free
We do not know you or your finances. I would seek professional advice from someone
you are willing to share all your information with. Hopefully an accountant that you have been dealing with for years. Why pay either off? It is far easier to tie your money, cash, into a house than to take it out should you need or want to. What are you, can you earn on that cash if you invest it. Yes, it is far more risk than having it sit in a day of deposit day or withdrawal account. Interest on the bond, yours may be less or more is 4-5%.
Mortgage is should be less than 3%. Long term stock market returns are 7-8%-depending on who or what you believe. I've done far better than that over the past 15 years.

You can easily set up your own annuity with out paying the outrageous commissions.
You go to a brokerage, put that cash into a fund and tell them to send a check every month that will cover your mortgage payment.

Whatever you decide. I would not do anything now. Our economy, our tax system is certainly in transition-like it or not. Our real dollar value is also in transition-like it or not.
Like the old advice. With the death of a spouse, or a divorce delay two years before making any commitment. I would wait until you move in full time. It is far less costly to do nothing then to do the wrong thing. Plan as you might, your taxes and your expenses will change dramatically when you quit working.

[PennyAnn]

It is not just the interest rate, which appears fairly low. They tack on large admin fees but don't really broadcast those. You'll feel like you pay forever, but never see the balance go down by much. Pay off the bond. As soon as you can. And lock your mortgage in with today's crazy low rates....you will win-win.

[Road-Runner]

Awesome responses, thank you to all who've replied! It helps to read through everyone's thoughts as they pretty much match my own considerations up to now. The info about the yearly admin fee on the bond is good to know. Unlike some potential buyers I did mentally add the bond amount to the list price of our home and considered that the true 'asking price' when comparing to other houses including used. Probably due to their location in a preferred central part of The Villages I couldn't find a used home with equivalent square footage for the same money as my new house south of 44. All good food for thought.

Thanks again, Jim

[dewilson58]

It is not just the interest rate, which appears fairly low. They tack on large admin fees but don't really broadcast those. .
Look at the Amortization Schedule...........the fee is well disclosed.

[DAVES]

Payoff bond , my interest rate was 7% plus a maintenance fee of $90/year. The villages is getting rich off this scam.

That is interesting. We bought 8 years ago the interest on the bond was 5%. If, you are were paying 7% it is no question, I would pay off the bond.

People who say you will not recover the value of paying off the bond when you sell, need to find when you sell a quality broker. This home comes with a pool which would cost you xxxxxx, landscaping that would cost you xxxxxxx, tiles that would cost you xxxxxxx,
THE BOND IS PAID OFF that would cost you xxxxxxxxx

[tuccillo]

The bond rates, the administration fees, and the amortization schedules are available on districtgov.org.

It is not just the interest rate, which appears fairly low. They tack on large admin fees but don't really broadcast those. You'll feel like you pay forever, but never see the balance go down by much. Pay off the bond. As soon as you can. And lock your mortgage in with today's crazy low rates....you will win-win.

[Bay Kid]

Listen to Dave Ramsey for great financial advice.

[Barryb46]

When you retire, you are usually on a fixed income, so it is all about cash flow. Whichever option will reduce you monthly/annual payments is the way to go.

[Dlbonivich]

I would pay down the one with highest interest rate.

[Bilyclub]

FYI: The Villages is not getting your payments. :shocked:

I have read that the developer was the main buyer of the bonds, especially in the past when they were tax free. Don't know how true that is today.

[Stu from NYC]

Listen to Dave Ramsey for great financial advice.

Very knowledgeable but a bit too conservative in my opinion.

[snbrafford]

After reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.

Just curious if others have gone through the same decision process.

Thanks, Jim

We bought an older home (2009) but still has the bond issue. We elected to pay down the mortgage rather than pay off the bond. From what we were told and has since been verified by our neighbors - villagers often move multiple times within TV for multiple reasons - one of our neighbors is on their 3rd house (they up-sized). Some folks down size as when a spouse passes or want to reduce living expenses (smaller mortgage). The person we bought from moved to a golf course view.

Additionally - paying down the mortgage reduces the monthly mortgage payment forever.

For this reason (possible moving), we did not pay off the bond as if we move, there is a high likelihood that there would be a bond on the "new" house and we'd be in the same situation again. But if we pay down the mortgage, that additional equity would always be there for us to use if we sell or if we need to use for something else.

HOWEVER, our thought process also included the fact that we will have the bond paid off in about 10 years which will reduce our overall expenses then.

When looking at homes (for the above reason), we did not consider the bond paid as a great selling point - more of a tie-breaker. But we were not looking at the new homes with new longer/higher bonds either. We are not sure if you would re-coup the bond in the selling price either.

[DAVES]

Paying down mortgage is big money saver, on interest. However some companies will reduce the monthly payments for a fee. Citizens First does for
175. But there are some lenders that will not.
Bond if you r planning on selling in 5 or 6 years, don’t pay off the bond.

However your financial person can put in better perspective for you

The math is above the comprehension of many. Reduce the monthly payments for a fee?
No one can pull money out of thin air. The options are simple. The mortgage brokers, banks, deliberately make it difficult to comprehend. If, you refinance to get a lower interest rate, the closing fees are 4-8,000. You will be charged that even if you refinance with the bank that already holds your mortgage. They will charge you for stuff like a title search. Searching for a lien against the property. They hold the original mortgage. If, a lien was put against the property, they would be notified. Points it will cost you like 4,000
for one point. It reduces the quoted interest rate so makes the interest rate look better than it is. At the falsely reduced interest rate it takes you roughly 6 years to recover the cost of the point. May or may not be worth doing.

You can also lengthen the time to pay off the mortgage. You are again going to pay closing costs on this deal. For some, I can only pay xxxxxx a month. You need to decide.
Perhaps, I should go to work? Work part time? Perhaps, I need to move? INFLATION-
costs are always going up. If, they go down in the realworld it is because we have gone into a depression. We are told the fed want 2% inflation. At that that rate in 36 years it will take two dollars to buy what a dollar does today. They have recently raised that 2% goal.

[DAVES]

Paying off the bond which interest/admin fee is high; after seeing it barely moved in amount left just like a mortgage we paid it off after the first year; huge savings on our tax bill where you pay it yearly

Re: the bond
It has a 30 year payout. People who have a mortgage do not, at least I did not, think.
We tend to think, so much per month. On a 30 year loan the pay off of the loan amount is minimal on a per month basis.

Huge saving on tax bill? I expect taxes to change yet again. But, under our present tax structure, far fewer people get more than the standard deduction. So interest on the bond or a mortgage saves you nothing in a tax deduction.

[david14221]

You can always use a home equity loan to pay off the bond. Your interest rate will most likely be lower, tax deductible, and you can pay that loan down if you choose to.

[Fourpar]

Although it may not be financially sound - to have zero debt is comforting and a nice position to be in. Something financial people never take into account is peace of mind.
Get rid of all your debt including the bond. If you can afford it of course.
Ditto!
And it is definitely a good feeling to owe nothing.
Life is good indeed!

[MandoMan]

After reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.

Just curious if others have gone through the same decision process.

Thanks, Jim

If I’m buying a house, if the bond is paid off, that’s a big plus! I’m much more likely to pay the asking price if the bond is paid off and there’s a new roof and HVAC system. Without those things, I may not even make an offer. On the other hand, I don’t care at all how big YOUR mortgage is. If you use the money to pay down your mortgage, that doesn’t help me at all. If you use it to pay off your bond, that DOES help me. That is, it helps me if you don’t raise your asking price by the amount of the bond. Thus, if you own the house, decreasing your mortgage won’t let you ask a penny more, but you will get to keep more when you sell. Paying off the bond may NOT let you ask more, so you have essentially lost that money, but it may be the thing that leads to a quick sale.

[retiredguy123]

Why would cash out value of your home decrease? Bond paid off is a selling point ! We are looking at homes & are NOT looking south of 44 due to the very large bonds. I have even heard of people making offers on homes & offering less than the asking because of the bond. The interest rate is higher than mortgage rates right now so I would pay off.
Assume that you own a house with a $20K bond that will sell for $300K today. You pay off the bond tomorrow. If you need to sell the house the next day and break even, you would need to sell the house for $320K. But, any real estate agent will tell you that you cannot get $320K for the house, because buyers would rather pay $300K for a similar house even if it has a $20K bond. Also, if the buyer needs a mortgage, they may not even be able to get one because it may not appraise for $320K.

[DAVES]

We sold a home up north for much more than our new home here and it had been paid off for many years. We could easily have paid cash for this house but with a mortgage of 2.75 percent we decided to invest our house money and we never plan to pay off either the bond or this house!!! We are in our 70s so the 30 year mortgage will last longer than we will !!!

I am far from an expert. I do like to believe I am a contrarian realist. The rules are set.
I will try to understand the rules and make the insanity work for me. Average age in the villages is 70. They cannot use reality to deny you a 30 year mortgage.

You can get a mortgage at about 3% and average long term stock market return is 7-8%
depending on who or what you choose to believe. I've done better than that over the past 15 years. Further insanity. Our mortgage bank directly told us we needed a letter from our brokerage that they would send us $$$$$ from our account every month.
Needed to raise our income to qualify for the mortgage. The broker directly told us they regularly get this request. They sent the letter to the bank and told us we could cancel it
with a phone call.

Aside, we have top credit scores. Further insanity. My wife is far better at accounting than I am. The money, of which I earned most of it, is in one pile. She pays the bills.
Her credit rating is or was slightly better than mine. Who is nuts? I've read that a sign of insanity is thinking the world is insane or is it thinking, expecting that the world is sane?

[Judy Vons]

We bought our home here last year at a low interest rate. Paying off a home makes no sense to us. We get a much better return on our investments; so the money needs to stay invested. We are also not paying off bond either. Why take $20000 out from investment accounts and pay a large amount of taxes on that money? Better to leave it in investments.

[M2inOR]

Here is one perspective and opinion.

We purchased a new home in Marsh Bend, 2019. Bond was $31,000 @4.33%

15year mortgage after 20% down and 2.875% interest rate.

Easy decision, as we have taxable savings and pension income, and untapped IRAs with many investments.

If we have too much income, we get penalized with IRMAA surcharges for our Medicare premiums. Ouch! As we got hit because of our 2019 income. We reduced our taxable income in 2020, and 2021 might be lower so those IRMAA surcharges may disappear next year.

Since our investments in taxable as well as tax-protected IRAs are returning much more that the bond and mortgage interest rates, we don't mind the monthly mortgage and yearly bond payments.

Remember, money taken out of your IRA is ordinary taxable income, unless you have a Roth. We don't. Selling investments from a taxable account also increases your income.

Our goal is to minimize taxable income each year, taking out only enough to live on, take vacations, and to pay our bills.

Many, many articles will educate you. Unfortunately, math is required.

Finally, if you have too much cash, no investments, then yes, use that cash to pay things off. Each family has unique circumstances that will guide your decision.

[dewilson58]

Here is one perspective and opinion. We purchased a new home in Marsh Bend, 2019. Bond was $31,000 @4.33%.

Plus the Admin Fee which will get you over 5% effective, non-deductible which will get you over ~7%.

[OhioBuckeye]

We only paid our Bond annually & when we sold our home we made money on it. So my thinking is if you buy a preowned home you’ll still have a bond maybe, if they paid bond annually. Also the way I look at it the 18 to $20,000. bond you’ll have it added to the price of your home when you get ready to sell, & If you think you can sell it with the added bond & make an additional profit go for it. Just my opinion pay your bond annually!

[M2inOR]

Plus the Admin Fee which will get you over 5% effective, non-deductible which will get you over ~7%.

Good point. And yes, I'm getting better than 7% return on my investments.

Life is complicated. Even more so when one fails to keep their math skills current.

[dewilson58]

Good point. And yes, I'm getting better than 7% return on my investments.

Life is complicated. Even more so when one fails to keep their math skills current.

We live in interesting times. :MOJE_whot:

[M2inOR]

We live in interesting times. :MOJE_whot:

An old Chinese saying that I started using after 9/11.

我們生活在有趣的時代
We live in interesting times

[eremite06]

With the increased standard deduction of $27,400, and today’s low interest rates, it doesn’t pay to itemize even with a mortgage.
That's why I paid off the bond.

[Burgy]

Check with your accountant whether he/she will put all or part of the bond and interest as a deduction like a house tax if you itemize. I think pretty common.

[retiredguy123]

Check with your accountant whether he/she will put all or part of the bond and interest as a deduction like a house tax if you itemize. I think pretty common.
Bond principal and interest payments on your primary residence are not tax deductible, even if you itemize.

[pgettinger01]

I think paying down or off the bond in todays dollars at a low interest rate is a waste. The dollar is worth less every year as the Federal and State debt increases.

[Tsalla Apopka]

all that matters is the interest rate! Pay off the one thing with the highest rate - whatever it is.

[CoachKandSportsguy]

Our goal is to minimize taxable income each year, taking out only enough to live on, take vacations, and to pay our bills.


If you want to minimize your taxable income each year, you pay off the bond right now, because you are getting more on the investment income than you are deducting in tax deductible interest.

that's simple math.

So unless your investments are tax free, then paying off the bond minimizes your income more. . . if that is your truly stated goal.

finance guy

[Joeint]

Newer bonds have lower interest rates. Realtors suggest not paying it off

Relators are who I consult for all my financial decisions. If they're not sure I check on Talk of The Villages.

[sabinfl]

SAfter reading through hundred's of listings in the Villages over the last several years prior to buying, it seems like the bond is almost an afterthought compared to the listing price. Although "No Bond" is listed as a selling point I don't know that it registers with most buyers how much debt the average bond is on new homes until after they pick a home to buy.

With that in mind, would it be crazy to pay off the bond vs paying down the mortgage by an equivalent amount? We're still working and our house in Bradford will be a 2nd home for at least 2 more years. When we sell here we'll want to reduce our monthly costs to the minimum possible so planning on using all the proceeds from the sale to reduce our only remaining payment, the house.

Just curious if others have gone through the same decision process.

Thanks, Jim

I bought in Lady Lake: No bond here. I recently had my home on the market and that did not seem to make a difference!

[jonathanb]

Paying off the bond does not
Increase the value of your home. If you plan on staying there the break even point on the bond is usually 12-13 years. We usually move to a new home every 2-3 years so we do not pay the bond off.

[J1ceasar]

There's another interesting legal issue to consider about the mortgage and the house. That is if you get sued having a bond and a high mortgage means it is less money for people or businesses to attach. Just a thought. And as I'm sure someone has pointed out in the comments it's always better to have cash in the bank than to have it in your house has it's a lot harder to get a second mortgage loan when you are in trouble, as well as the fact that if you have the money invested the stock market seems to be going a lot better then 1/10 of 1% at a bank

[VillagerNut]

If you obtained your loan through citizens bank, they actually have a re-amortize program which is what the previous post was referring to at $175. You have to put a minimum of $10,000 toward the balance of your mortgage and they will re-amortize and not refinance the loan. So the total cost is $175 to get a lower monthly payment. The term and interest does not change.

[Road-Runner]

If you obtained your loan through citizens bank, they actually have a re-amortize program which is what the previous post was referring to at $175. You have to put a minimum of $10,000 toward the balance of your mortgage and they will re-amortize and not refinance the loan. So the total cost is $175 to get a lower monthly payment. The term and interest does not change.

We did and we definitely like that feature. It's one of the reasons we would consider paying down the mortgage to help with cash flow in retirement.

[irishwonone]

FYI: The Villages is not getting your payments. :shocked:

The Villages (Banks) are financing the Bond Payment. Recently read where they refinanced bond at lower rate through Villages bank. Villages are excellent at capitalizing on financial opportunities as most good businesses do.

[Stu from NYC]

If you obtained your loan through citizens bank, they actually have a re-amortize program which is what the previous post was referring to at $175. You have to put a minimum of $10,000 toward the balance of your mortgage and they will re-amortize and not refinance the loan. So the total cost is $175 to get a lower monthly payment. The term and interest does not change.

Since the actual cost of them doing this is all of about $ .25 wonder why they charge at all?

The probable answer is because they can.

[CoachKandSportsguy]

If you obtained your loan through citizens bank, they actually have a re-amortize program which is what the previous post was referring to at $175. You have to put a minimum of $10,000 toward the balance of your mortgage and they will re-amortize and not refinance the loan. So the total cost is $175 to get a lower monthly payment. The term and interest does not change.

Hmmm, cost versus cash flow. . . not quite the same

Cash required to perform the re-amortization, 10,175

Total cost to mortgage is $175 because the 10,000 goes to principle, but total cost to your checkbook, 10,175.

finance guy

[DAVES]

We live in interesting times. :MOJE_whot:


Times have always been interesting. I have an old book on bicycles. They predicted the end of proper female behavior now that they could peddle away from home. The scandal,
wearing pants not a dress to ride a bike. Another book about 1900 was pushing electric trucks. Carts and graphs showed clear if you do not buy an electric truck the cities people would be swimming in horse droppings in, hum was it seven years.

We have not invented insane panic.

[DAVES]

There's another interesting legal issue to consider about the mortgage and the house. That is if you get sued having a bond and a high mortgage means it is less money for people or businesses to attach. Just a thought. And as I'm sure someone has pointed out in the comments it's always better to have cash in the bank than to have it in your house has it's a lot harder to get a second mortgage loan when you are in trouble, as well as the fact that if you have the money invested the stock market seems to be going a lot better then 1/10 of 1% at a bank

Re: the stock market.
We tend to get lulled into believing the stock market only goes up and real estate only goes up. Reality is it is true except when it isn't.

As on 3/31/21 this has been the best year in 15-20 years in the stock market. The S&P is up 56.35% as a full year ending 3/31/21. We tend not to understand math. If, you invest 10,000 and it goes up 10% and down 10% the next year YOU ARE NOT EVEN.
10,000+10%=11,000 11,000-10%=9900 HUH WHERE DID MY 100 VANISH TO. Recovery
9900 needs to earn just under 2% just to get back to your original 10% to the 11,000 you had at the end of the first year it is almost 13%.

[DAVES]

There's another interesting legal issue to consider about the mortgage and the house. That is if you get sued having a bond and a high mortgage means it is less money for people or businesses to attach. Just a thought. And as I'm sure someone has pointed out in the comments it's always better to have cash in the bank than to have it in your house has it's a lot harder to get a second mortgage loan when you are in trouble, as well as the fact that if you have the money invested the stock market seems to be going a lot better then 1/10 of 1% at a bank

Re: getting sued
The sad reality. If, you have no money and or a negative net worth, you do not need to worry about being sued. Even if you are guilty. The attorney will advise the person suing there is nothing to take. If, you win you will get nothing.

In Florida, real estate laws prevent creditors from taking your home. Perhaps, a reason why OJ Simpson moved to Florida.

[DARFAP]

Mine is 5.2%

[stebooo]

Kind of an interesting trick that the developer plays on the price of the home. If they can take a lot of their startup cost and throw them into a bond it keeps the main price of the home down when in fact you're going to pay it whether you like it or not kind of a little cute trick. I don't have a bun so I don't have an issue in this fight but I understand that the interest rate is around 7% for the bond So unless you're making that kind of money and investments you pay off the bond. The villages does not promote that same concept they say oh just never mind nobody pays off the bond Well I guess that depends on interest rates and stock returns choices yours

[Sudokukid]

Point to consider: For the first years of home ownership the bond payment (included as an annual installment in your Real Estate Tax bill), goes mostly to interest and only a small amount to reducing the actual bond. The sooner you pay it off, the lower the amount of interest you will pay over the long haul.

[dkaufnelson]

You can no longer deduct the interest on your mortgage for your primary home. You can only deduct mortgage interest on rental homes now.

[retiredguy123]

You can no longer deduct the interest on your mortgage for your primary home. You can only deduct mortgage interest on rental homes now.
Not true

[manaboutown]

You can no longer deduct the interest on your mortgage for your primary home. You can only deduct mortgage interest on rental homes now.

???

"The home mortgage interest deduction (HMID) allows itemizing homeowners to deduct mortgage interest paid on up to $750,000 worth of their loan principal.
The Tax Cuts and Jobs Act (TCJA) passed in 2017 reduced the maximum mortgage principal eligible for the deductible interest to $750,000 (from $1 million) for new loans.
The TCJA also nearly doubled standard deductions, making it unnecessary for many taxpayers to itemize.
As a result, most went on to forgo the use of the mortgage interest tax deduction entirely."

Calculating the Home Mortgage Interest Deduction (HMID) (https://www.investopedia.com/articles/mortgages-real-estate/11/calculate-the-mortgage-interest-math.asp)

[valuemkt]

The question was either or.. If you have a mortgage, you probably have an escrow. The 1098 has one line for real estate taxes paid, which is the sum total of what the bank pays sumter county. The standard deduction is now around 25K. If you dont do your own taxes (or even if you do) you might want to look and see if you;re still itemizing. For most, the tax deductibility or either is probably moot. Even if you are "certain" you won;t be moving, my vote would be to pay down the mortgage. The remaining bond payable won;t generally affect your sales price, the lower mortgage payable will go into you or your heirs pocket .. and at 30K or less, the interest differential isn;t much more than a couple of beers at Cody;s. IMO

[Stu from NYC]

The question was either or.. If you have a mortgage, you probably have an escrow. The 1098 has one line for real estate taxes paid, which is the sum total of what the bank pays sumter county. The standard deduction is now around 25K. If you dont do your own taxes (or even if you do) you might want to look and see if you;re still itemizing. For most, the tax deductibility or either is probably moot. Even if you are "certain" you won;t be moving, my vote would be to pay down the mortgage. The remaining bond payable won;t generally affect your sales price, the lower mortgage payable will go into you or your heirs pocket .. and at 30K or less, the interest differential isn;t much more than a couple of beers at Cody;s. IMO

But you should also consider that pesky service charge paid annually. That will ultimately be the reason we pay off the bond one of these days.

[valuemkt]

pesky service charge ?? I think you folks are making a big deal out of nothing .. For many, the YEARLY admin fee is 40 or 50 dollars.. Even in the newer section, the highest ive seen is 130. Ten bucks a month and all this hullabaloo about the admin fee ? And thats with an interest rate of 4.33%.. Again, given the either or..i'll stick to the mortgage paydown, with the reduced monthly payment of perhaps a couple hundred bucks a month on a 15 year mortgage

[Bay Kid]

I really hate owing money. Debt free for over 30 years.

[Bilyclub]

pesky service charge ?? I think you folks are making a big deal out of nothing .. For many, the YEARLY admin fee is 40 or 50 dollars.. Even in the newer section, the highest ive seen is 130. Ten bucks a month and all this hullabaloo about the admin fee ? And thats with an interest rate of 4.33%.. Again, given the either or..i'll stick to the mortgage paydown, with the reduced monthly payment of perhaps a couple hundred bucks a month on a 15 year mortgage

I thought the majority of homes in TV are bought with cash. If most people don't have a mortgage any fee on top of the 5 1/2 % interest is too much. Paid mine off.

[CoachKandSportsguy]

pesky service charge ?? I think you folks are making a big deal out of nothing ..

financial laziness. . . there are so many organizations which make 100% margin on such small transactions and just rake in the dough. .. or the wealthy. . .

some of us don't have extra money to pay to someone else INSTEAD of having the beer.

[Dorebea]

The right decision for you will be whatever best fits your financial situation and goals. The suggestions to consider your cash flow status, interest rates on the mortgage and the bond, how long you plan to keep the house, your risk tolerance etc are excellent. Your stated goal is to minimize your monthly cash outflow so on the surface paying off the bond and eliminating that expense seems to be the way to go. Assuming a bond amount of $25k the annual assessment would be about $1472 which is about $123 ($1472 by 12). BUT, as noted there are multiple aspects to consider. I’d like to add one additional consideration I haven’t seen mentioned...

When / if you sell your house in the future you will need to pay off the outstanding balance on your mortgage, but you do not have to pay off the balance of the bond. That just gets carried forward to the new owners. Also, applying the $ to the mortgage leaves you with some ability to access that (via equity Line of Credit) should an emergency arise and / or increases your net profit from any future sale of the house ( sale price less outstanding mortgage balance). While you save the annual bond payment it will take about 17 years to break even on the full $25k ($25k / $1472).

Note: I do not currently own a house in The Villages but am considering it and have been researching this very question myself. Good luck!

[Two Bills]

If you are earning more from your capital, than you are paying out in loan interest, live with the interest payments.
When your not earning more, pay off your debts.
When you retire, cash in everything, put as much as you can into Interest + inflation cash bonds, or tax free interest funds.
No dramatic gains or losses.
Pay off everything, put your feet up, and have no investment worries.
Worked for us.
Been retired 26 years, and reckon we are good financialy for another10-15 years at same rate of depletion.
After that, if still here, will be to old to give a toss anyway!
Thanks to Covid, and minimal spending on travel etc. showing a good profit this year.
Will treat myself to an ice cream when weather warms up!:ho:

[Stu from NYC]

If you are earning more from your capital, than you are paying out in loan interest, live with the interest payments.
When your not earning more, pay off your debts.
When you retire, cash in everything, put as much as you can into Interest + inflation cash bonds, or tax free interest funds.
No dramatic gains or losses.
Pay off everything, put your feet up, and have no investment worries.
Worked for us.
Been retired 26 years, and reckon we are good financialy for another10-15 years at same rate of depletion.
After that, if still here, will be to old to give a toss anyway!
Thanks to Covid, and minimal spending on travel etc. showing a good profit this year.
Will treat myself to an ice cream when weather warms up!:ho:

Agree with most of what you say but think you are a bit too conservative.

Think people need to put a percentage of their savings into equities. Would make it diversified and mutual funds with good long term performance that are no load.

Most people need to have their capital growing so as not to run out of money.

[Two Bills]

Agree with most of what you say but think you are a bit too conservative.

Think people need to put a percentage of their savings into equities. Would make it diversified and mutual funds with good long term performance that are no load.

Most people need to have their capital growing so as not to run out of money.

You are right. Very conservative.
As I say, it has worked for us over the years.
We were lucky to have a very good financial advisor when working, and really did well with investments in the crazy 90's!

[Stu from NYC]

You are right. Very conservative.
As I say, it has worked for us over the years.
We were lucky to have a very good financial advisor when working, and really did well with investments in the crazy 90's!

Works for you is what is important.