The Bond

[JoanNem]

Hello there,

My husband and I would like the hear the pros and cons of paying off the bond. We will be closing on our home shortly. And just wonder which way to go.
Thanks in advance

[pooh]

We did not pay off our bond....money used to pay it is taxable for us....and if we sell the house, I'm not sure it makes that big a difference, at least for our house. Some of the newer homes have very significant bonds I've been told, upwards of $50,000. If we ever moved, we would probably be looking at another place that might also have an unpaid bond...so.....in essence, we've gained nothing.

Others don't want to have that "debt" hanging over their heads and feel more comfortable paying it off.

It's a matter of what you feel comfortable with financially and emotionally.

[GeorgeT]

Hello there,

My husband and I would like the hear the pros and cons of paying off the bond. We will be closing on our home shortly. And just wonder which way to go.
Thanks in advance

The bond generally has a high interest rate which you cannot write off. If you plan on staying in the house then I suggest you pay off the bond. If you do decide to move after the bond is paid you can use the fact that the bond is paid off as an incentive to perspective buyers.

[zummy]

I agree on both counts. It is not a tax deduction and if you plan on staying, you in effect earn 7% on your money by paying it off.

[rjm1cc]

Part of the answer depends on your view of debt (mortgage and bond) and inflation. If inflation is going to go up in the future , a mortgage and bond might be a good "investment".

[GeorgeT]

Part of the answer depends on your view of debt (mortgage and bond) and inflation. If inflation is going to go up in the future , a mortgage and bond might be a good "investment".

I understand why holding onto a mortgage with a low interest rate but why classify a bond as an investment? Just wondering. Maybe I can learn something.

[Tiger Lady]

I was always taught you should be debt free if at all possible. PAY IT OFF!!!!

[aljetmet]

If you don't pay off the bond the funds are available to you. An option is to buy an investment with those funds.

[JoanNem]

That was our thinking !!

[Larry Wilson]

We had the money so we paid off the bond and saved that interest.
I notice on selling pre-owned that they always put it as one of the highlights of the house. BOND PAID
We are debt free at this stage of our lives and want to keep it that way.

[aljetmet]

I understand that bonds issued by Greece have hefty returns!

High yields to maturity. But will they mature?

[JoanNem]

Exactly ! That is what we thought.

[GeorgeT]

If you don't pay off the bond the funds are available to you. An option is to buy an investment with those funds.

That's a good idea if your investment return is more than the bond interest.

[JoanNem]

I was always taught you should be debt free if at all possible. PAY IT OFF!!!!

The bond generally has a high interest rate which you cannot write off. If you plan on staying in the house then I suggest you pay off the bond. If you do decide to move after the bond is paid you can use the fact that the bond is paid off as an incentive to perspective buyers.

I like the way you think George. I am really beginning to think, that paying off the bond is a very good idea. Thanks everyone for your help.

[GeorgeT]

I like the way you think George. I am really beginning to think, that paying off the bond is a very good idea. Thanks everyone for your help.

Glad to help.

[batman911]

Difficult to find a reliable return on investment after taxes of 7% without taking on a lot of risk.

[rjm1cc]

I understand why holding onto a mortgage with a low interest rate but why classify a bond as an investment? Just wondering. Maybe I can learn something.
Debt is not normally an investment so I was not being completely serious. The reason I called it an investment is that you pay off the debt with dollars that are worth a little less each month (Inflation). The inflation is your income on your "investment". Lets say you have debt of 100,000 for 30 years. In today's dollars you might only pay 90,000 to pay off the debt. (yes plus interest) The point was that one of the variables to consider is the effect of inflation which could be substantial as energy, food and medical costs increase.

[new peeps]

One other idea to ponder. I think either way has pros & cons that has already been brought up. One other option you may want to consider is to live in the house for the first year to make sure you love the house, area and neighbors. Then if you are sure this is the final house pay off the bond on the second year. It will cost you a year of interest but give you some time to evaluate all of the other changes that you made in your life the previous year. This is what we done as when I ran my numbers my investments for the last three years was averaging under the interest rate charged for the bond.:cus: I had no regrets with the decision and actually smiled a little when I got my second yearly tax statement as it was lowered by about $1000.00 if my memory is correct. Now if I could get my investment back in gear I would really be happy.:a040:

[Pturner]

Just as added information, some of the CDD's have refinanced the bonds to lower interests rates. So the interest on your home bond might be lower than 7 percent. For example, I believe it is 4 percent on bonds still outstanding in District 8.

[2 Oldcrabs]

We will be make settlement in Dec on a new home in Sanibel. The bond is $20,259. The yearly amount is $1,713.56 for the next 30 years. That is $51,406.80 you pay out at the end of 30 years. You can not write the interest off on your Taxes. But if you pay off your bond and try to sell your house in the first few years you may not recover the bond cost. Live in the house a few years and then make the decision. You may want to do a Home equity loan if you think you can write the interest off on your Taxes. There are several factors to look at, future income, cash assets, (can you make more in the market), what you want to leave your heirs, life expectancy and the "sleep factor". Everyones situation is different