Do I get my bond value back if I pay if off early?
 

Based on the current zillow estimate, after two years of owning the property, the Zillow estimated market value currently equals the original purchase price plus the initial bond, within a 1K . . .

Now, if one is flipping a house, definately do not pay off the bond. However, if you are keeping the house for greater than 3-5 years, currently paying off the bond will save interest expense, and you will get your bond payment back. . the goal being to reduce money rental fees.

And don't @ me about Zillow estimates, I understand how they are done, can perform the same regression analysis with the same data set they have, and the variances. And i know you can believe or disbelieve anything you want, but from a data point of view independent of my beliefs, you can get your bond back as long as you wait for your price.

There are behavioral analysis studies showing that realtors price based on getting their commission, not getting your price, even if you think that they work for you. . .

sportsguy

Yes to can pay off your bond and hope to recoup the funds when you sell or you can pay the bond yearly and not even think about it. My bond is part of my mortgage payment and I think the interest rate is lower than the rate I have on the mortgage. I never have to think about it which works for me.

In my opinion, if you pay off the bond, you will not get the bond money back when you sell. Typically, when a real estate agent lists a house, they will not reflect the bond in the listing price. It's better to keep the bond if you plan to sell within 8 years or so

My philosophy on any debt was simple.
If my capital was earning more than the interest on the debt, keep the capital.

Better check the interest rate. Mine was 7% I think. I was paying almost $1500 each year. Mortgage rates are so low now I would pay it off for sure!

Some bonds have been refinanced at lower rates so paying off might be less attractive.

Yeah, ours was 6% so we paid it off after a three years.

Several real estate agents we consulted on this said we would not get our value back so up to now we have left it alone.

Not sure if it's funny or sad when buyers do not consider bond balance when purchasing a house.
"my house is for sale, oh by-the-way there is a $40,000 lien against it but you can ignore it"

:1rotfl:
ok, it's funny to me

I’ve sold 4 homes in villages never paid the bond off , some buyers will offer a bid after subtracting the bond , that doesn’t work for me , I’ve never been in one of my homes for more then 4 years they are well set up when I sell and all went for over assessed value and furniture package outside the deal , I would never pay bond off , you don’t know if you’ll have to sell for some reason, I’ve also sold 8 other homes and condos all over fl never put down more then20% on any of them

Maybe maybe not? But for me I know I’M NOT paying interest on bond. If I was like some and trade houses like cars then I wouldn’t pay off bond.

Our finance guy asks do you know the bond pay off. It’s the 2nd question after how much is the asking price

Logic.

I look at it this way, do you think you're going to live 30 years after buying your retirement home in TV. My bond is $1,100 a year or $14,000 when I started in a CYV. So if I die within 13 years I'll come ahead, if I live longer I'll pay more than was needed. I'm just pay the $1,100 and not really think about it.

I have a reverse mortgage, so I'm not worried about heirs inheritance. My wife is 9 years older than me, so we'll probably live about the same life span. Now at age 70, having smoked 3 packs a day for 35 years, I never thought I would live this long.

I'm not going anywhere so 5.507% a year in interest had to go. Paid it off last year but still haven't got the paperwork. Can't see the prices here going anywhere but up.

My wife and I retired, full time, to TV 3 years ago. The home was 4 years old at that time. We paid cash and 3 days later paid the the bond off. We have no intention of moving. If we had not paid off the bond then it would have always bugged us that we really never fully paid for the house. Realtors only care about a fast sale and a fast commission. If a realtor told me I would not recoup the bond cost, I would simply hire another realtor.

We feel the same way. When we eventually purchase, while the bond will be a part of the equation of what we choose to purchase, since we will be buying used (between 466 & 466A) it will only be a small part of the equation.

Bond debt and mortgage debt are very different. When you sell your house, potential buyers won't care about your mortgage because it will be paid off at the closing. But, they will care about the bond. Unfortunately, many potential buyers would rather assume the bond debt than reimburse you for having paid it off.

I don't recall any difference in asking price for houses with the bond paid off. Zillow and other estimates are based on the value of the home and don't consider the bond or any other liens. Sellers and buyers both use those estimates. It is unlikely that a seller would price their home at less than the estimate due to the bond and it is unlikely that a buyer would pay more than the estimate for a home with no bond.

You only "recover" the bond if you can convince a buyer to pay more for your home than the same home down the street. It is going to be going to be difficult to convince them to pay $20K more today in order to save $1,500 in bond payment three years from now when they can get the same house for $20K less down the street.

especially when there are so many questions about the bond on TOTV. People are confused/concerned about the bond AFTER they have bought their house, whereas they should factor it into their buying decision.

I chose to pay it off and be done with it.

So I don't get some responses, the house appreciation without the bond is now greater than the bond, and some say that I won't get the money back if I pay it off? with that logic, no matter how high the house value gains, you will never get the bond paid off back. . .

So for simplicity, house was purchased for $350,000 two years ago, the bond is $30,000 and the current house price is $380,000. Lets use another $15,000 price appreciation for the next year. I list the house for 399,000 sell for 395,000, gain is $45,000 and the bond paid off was $30,000. so you are still saying that I am not getting my bond money back still?

The difference is that I don't have to pay for rented money, the interest of which may or may not be deductible in an audit, but only 20% deductible, so I am still paying rental fee of 80% of the interest payment. . . versus the risk of losing income, assets, whatever, and not being able to pay the bond. . .

I think there are alot of old realtor tales out there. . .

So where is the logic wrong that I am not getting my bond money back?

sportsguy

The house appreciation is irrelevant to the bond calculation. Assume you have two equal houses for sale, one with a $30K bond and one with no bond. A potential buyer is not willing to pay $30K more for the house with no bond. That is just the way the market works. So, the seller who paid off the bond is at a disadvantage when selling their house because they will not recover the money they spent to pay off the bond. My opinion and I think most real estate agents will tell you the same thing. You can price a house anyway you want, but that doesn't mean you will get your asking price.

Zillow is a only wishful guess. It’s only worth what some will pay. Even if it’s over the appraisal. House down street sold in 1 day but there was bidding war for week way over the appraised price, yes it was corner lot, on golf course, and bond wasn’t paid off.

The selling price of the house is $395,000 and the gain is $45,000 regardless of whether you paid off the bond, that is just the market price.

If you paid the $30,000 bond then your net profit on the house is $15,000.

If you didn't pay the bond then you made about $6,000 in payments on that "rented" money over the course of those three years. You passed the balance of that $30,000 bond to the new owner and your net profit is $39,000.

The house sells for the same price either way. The difference is in how much you took out of your bank account during that time.

This issue has been asked and answered in many threads.

Most buyer expect to be pay a bond balance. If yours is paid off it will benefit you if you keep it, but won't benefit you if you sell it.

Are buyers foolish to not consider bond balances? Yes. Are sellers foolish to think a bond paid off early will greatly increase the value of their property's value? Yes.

Agreed was about to say the same thing but you beat me to it.

Are there that many stupid buyers out there??


$300,000 house, no bond
$300,000 house, $30,000 bond (a/k/a lien)
Same selling/buying price????:faint:

Yes. I don't think you will get $330,000 for the house with no bond. And, I don't think an agent will want to price it at $330,000 because it will not be competitive with an equal house priced at $300,000 with a $30,000 bond. Another problem can be that the loan appraisal may not be high enough to get a mortgage on the $330,000 house.

I have not been exposed (which doesn't mean it's not out there) to these stupid people.


The appraisals will be the same. It's up to the banker to determine the max loan they will issue given the two different net values and being second in line behind a $30k lien on one property.


:icon_wink:

I'm not sure it's considered a lien on the property, at least from the mortgage perspective. I'll have to dig out my title paperwork but I don't recall the bond being listed and I'm sure that while the banks for the primary and secondary mortgage insisted on being listed on the home insurance, the bond did not.

If the bond balances doesnt play into the transaction, why do realtors post it in the property description? It is a feature, like a new pool or new kitchen.

Like any upgrade to a house, you dont get usually 100% back, but there is some value. Probably between 50% and 100%

Am I missing the interest paid portion of the payments factored in this analysis?

It is a lien. Mortgage is subordinate. The bond lien is on the land......doesn't care about the home insurance.

Oh, I see the confusion. . . people aren't looking at math, they are interpreting the question with a fallacious scenario. people are confusing adding the bond to the selling price, which is not the calculation of getting your bond payment back, nor should it be, that's a stupid concept.

If the price appreciation of the house is greater than the cash paid out on the bond, you get your bond payment back. Nowhere was the point of a stupid realtor saying to add the bond to the price of the house. The house is always priced at market at sale time, I just used zillow as a proxy, as an example which is showing that enough price appreciation will get your bond payment back, which for me was about 2 years at present, so not interested in paying bond payments. . . . My house has enough appreciation in a little over two years to get the bond cash back at time of sale.

and if the price appreciation continues at even slightly less, after 5 years, the cash used to pay off the bond is returned plus. . . so yes, one will get the bond paid off early cash back, for most everyone between 3 and 5 years. . .

sportsguy

The $6,000 in my example is the principle and interest paid on the bond for the three years.

I'm simply looking at the net profit. I sell the house for $45,000 more than my purchase price, that is my gross profit. Now I need to subtract the cash I put into the house. If I paid off the $30,000 bond then my net profit is $15,000. If I didn't pay off the bond then I made yearly payments of principle and interest which are roughly $2,000. Over the course of three years that would be $6,000 paid out for a net profit of $39,000.

In both cases the home has appreciated enough that you will get more money out than you put in. In one case you have $15,000 more and in the other you have $39,000 more. I'll take option B.


NOW, in my case the payoff on the bond is approximately the same as ten times the annual payment. If I plan to stay in the house over ten years then there will be less out of my pocket if I pay off the bond now than if I make the annual payments - it just adds up to less.

Of course, there is the "on the other hand." On the other hand, my money might earn more in investments than the interest I'm paying on the bond. In that case it would make sense to keep the money invested. This calculation will be different for everyone.

I would show you the error of your ways but do not like your name calling so will move on.

And that's why I'm buying a house that already has the bond paid off. I would rather not have an extra payment that to me, goes to nothing...

If you want to know if the bond being paid will recoup 100%; try this. Ask a person how much they paid for their house. They almost always give you the figure without the bond.

That same simplistic thinking will apply to the buyers on the back end too.

We paid the bond off ten years ago. Time goes fast and we're at the point where the amount we'd "lose" if we sold is negligible and nothing to worry about. For us, It was definitely worth it to get rid of the annoying bond.

:1rotfl::1rotfl: