[Paul B]

What does "conventional wisdom" say on paying off the bond for our home. We have owned it two years and will be selling property up north. My "understanding" is that the interest rate is around 7 percent. Please let me know what you think. I have heard bad idea if you are going to sell (we do not foresee that) and good idea if you don't plan to. Thanks

[graciegirl]

Originally Posted by Paul B

What does "conventional wisdom" say on paying off the bond for our home. We have owned it two years and will be selling property up north. My "understanding" is that the interest rate is around 7 percent. Please let me know what you think. I have heard bad idea if you are going to sell (we do not foresee that) and good idea if you don't plan to. Thanks

Talk of The Villages - Search Results

[784caroline]

If you have the cash and it is not being invested in any way or you donot expect to have any immediate outlays in the near future that you would need this money...by all means pay it off.

Some of the original bonds were at or around 7% but The Villages CDD's have in the past 2-3 years been calling most of the outstanding bonds at their 10 year mark and refinancing them at around 3.5-4%. Village property owners who still have an outstanding bond in these CDD's should have been notified of an adusted payout schedule....ie lower payments.

Just last week in The Village Sun newpsper there was an ad by FMS Bonds Inc who were selling Village Community Development District #6 bonds issued in 2013 callable in 2022, mature in 2035...These bonds were issued with Coupon rate of 4% but were now prices to pay a 4.4% rate tax free. The original coupon rate for these bonds when issued in 2003 was well over 6%.

[Bogie Shooter]

Originally Posted by Paul B

What does "conventional wisdom" say on paying off the bond for our home. We have owned it two years and will be selling property up north. My "understanding" is that the interest rate is around 7 percent. Please let me know what you think. I have heard bad idea if you are going to sell (we do not foresee that) and good idea if you don't plan to. Thanks

Get your actual interest rate here:
Amortization Schedules - Sumter

[mickey100]

I believe you are paying mostly interest the first 10 years, so refinancing the bonds at a lower interest rate will help, but you will still have not paid off that much on the principal as you would have with the lower rate. We were in the same boat, and paid ours off as soon as possible, and are happy we did so. We're going on nine years now - how time flies, and we saved a lot of $$ not paying all that interest. Plus, I like the peace of mind of having no debt.

[Challenger]

Originally Posted by Paul B

What does "conventional wisdom" say on paying off the bond for our home. We have owned it two years and will be selling property up north. My "understanding" is that the interest rate is around 7 percent. Please let me know what you think. I have heard bad idea if you are going to sell (we do not foresee that) and good idea if you don't plan to. Thanks

If your bond interest rate is 7per cent, if you have cash or near cash assets invested at less than your bond interest rate, if you have no critical needs requiring liquid assets, then IMO it would be a good financial decision to repay the bond. By paying of the 7 percent bond you have in essence made an absolute guaranteed investment at the stated rate. Do you know of any other absolutely guaranteed investment at this rate?

If there is such and investment, please post it here so that we all may benefit

[Paul B]

Thanks much.

[OBXNana]

" I have heard bad idea if you are going to sell (we do not foresee that) and good idea if you don't plan to. Thanks'[/QUOTE]
Part 2 of the original post.

We paid our bond off at settlement in February after playing with numbers. It was the best choice for us.

Can someone answer part 2 of the question? Our original sales person said it was not a good idea to pay off the bond. He said if we were to sell we would not recoup the amount we paid for the bond. We don't plan to sell, but would be interested in knowing other peoples thoughts. Are selling prices higher when there is no bond? My curious mind would like to know.

[Philip Winkler]

If you know that you this is the last place to live then it may be a good idea to pay it off.
People don't realize that when you pay your property taxes early you get a discount; you also get the same discount on the bond. So the actual interest rate paid is lower than the bond interest rate. Look at your last tax bill.
Also, when you sell your home you will not get full credit for a paid-off bond.

[784caroline]

The reason it is not a good idea to pay off the bond if you plan to sell your house in the near future is ...assuming the house is relatively new and you have an approx $20,000 bond, if you paid the bond off you would have to sell your house at $20,000 over comparable houses in your area to break even. Doing so could also put you in a different pricing market for people looking to buy a home and limit your potential buyers...ie if your house is appraised at $289,000 you would now have to price it at $309,000 to recoup the bond price. However alot of people when looking for a house look at price ranges and if their rangewas under $300K well they may have missed your home.

Considering most people when they first look here do not even know what a bond is, they will always go to the cheaper house. Even if there are those who know about the bond and it being paid off, in most cases they will make offers much less than you can probably get by just selling the house outright.

Paying off the bond only makes sense if you plan to stay in the house!

[Challenger]

Originally Posted by 784caroline

The reason it is not a good idea to pay off the bond if you plan to sell your house in the near future is ...assuming the house is relatively new and you have an approx $20,000 bond, if you paid the bond off you would have to sell your house at $20,000 over comparable houses in your area to break even. Doing so could also put you in a different pricing market for people looking to buy a home and limit your potential buyers...ie if your house is appraised at $289,000 you would now have to price it at $309,000 to recoup the bond price. However alot of people when looking for a house look at price ranges and if their rangewas under $300K well they may have missed your home.

Considering most people when they first look here do not even know what a bond is, they will always go to the cheaper house. Even if there are those who know about the bond and it being paid off, in most cases they will make offers much less than you can probably get by just selling the house outright.

Paying off the bond only makes sense if you plan to stay in the house!

If purchasers are not being informed that the total compensation for the home is in fact the purchase price plus the unpaid bond , I believe that the are in fact being misled. Im surprised that this issue has not been litigated.

To say that a $200,000 price with a $15,000 bond balance is cheaper than a price of $215,000 with no bond is intentionaly misleading, unethical and in the case of representation by real estate professionals and appraisers, probably actionable.

[tommy steam]

I see from time to time financial advisors advertising on here. I'd like to see them weigh in on this subject and get their take on it.

[Ourtime]

While many have been "Brain Washed" by their realtor and told NOT TO pay off their bond there are MANY reasons that make total sense to pay it off.
1. Bond IS NOT tax deductible and you see NO advantage at tax time yearly. There are also ADMIN costs attached yearly to the bond as well.
2. The amount of interest you save if you pay it off right away is "most likely" more than you make on funds invested. If that is the case "your saving $$ by paying it off".
3. If you pay off the bond and are going to stay in the home approximately 12 years before selling you will be at the "Break Even Point" (since you did not pay that accruing interest) you will be able to advertise "Bond Paid" at selling time and that is attractive. Of course if you have NO PLANS on selling the home and it is your permanent home for 30+ years you have saved Tons of cash.
4. Surely 2 houses of equal selling value and comparative in style and one is "Bond Paid" makes your house much more attractive in the selling market and debunks the Myth of "don't pay off your bond"!

We paid our bond off the 2nd year we owned and we are now in the home 5 years and have no plans on selling. It made total sense for us. Our 14k bond (now paid) would have cost us 35k + at maturity (30 years). I hate paying interest!

[784caroline]

Originally Posted by Challenger

If purchasers are not being informed that the total compensation for the home is in fact the purchase price plus the unpaid bond , I believe that the are in fact being misled. Im surprised that this issue has not been litigated.

To say that a $200,000 price with a $15,000 bond balance is cheaper than a price of $215,000 with no bond is intentionaly misleading, unethical and in the case of representation by real estate professionals and appraisers, probably actionable.

Most people after spending some time looking for Real Estate here in The Villages quickly realize what a Bond means and how it is to be paid. I think few people, if anyone, are being misled. However it does not change the fact that the initial cash outlay to buy a $200,000 house with a $15K bond is cheaper than a house costing $215K with no bond. Also when you are looking at comparable houses...the $215K house will appear more expensive because you will need more money to get in it and the $200 K house will most likely sell faster...UNLESS the $215K house seller agrees to a lower price thus negating the benefit of paying off his bond early.

[OBXNana]

When we began looking in The Villages, we explored existing and new construction. We would take the asking price of an existing home and add the remaining bond together to get what we felt was the actual price. We were told our number was not accurate. We did agree because when you take the cost of the bond over the remaining period, it far exceeds a house of comparable value. It made our argument stronger.

I don't feel we were being deceived. I think it's what this sales person truly believed. Are there any Villages sales people that post on this forum? My intent is not to stir up trouble, simply to understand.