Paying off bond
 

Is paying off bond a good investment when it comes time to sell your home?

Good question, but someone beat you to it last month and several dozen times before that.

Here last months thread: https://www.talkofthevillages.com/fo...highlight=bond. ;)

Hi Bleu,

There are varying reasons why individuals choose to pay off the bond. But, in my opinion, paying it off and expecting to recoup the amount if you sell is not realistic. Therefore, I do not see it as a good investment--from the standpoint of Return on Investment.

While a paid-off bond might tip the scales for a buyer who has found more than one house to consider, the fact remains that the comps are the comps. It is what the market will bear and sellers need to compete in several ways.

(Buyers who insist upon looking only at houses with paid bonds are limiting themselves tremendously by eliminating a whole bunch of homes that could be just right for them.)

In Post #2 here in this thread, CWGUY provided a link to a recent thread on this topic. That thread was one of the better discussions we have had around here lately. But I see that thread has been closed. You might want to take the time to open CWGUY's link and read through it for more information, and opinions from different angles.

No.

The fact is that an outstanding bond balance must be added to the purchase price of a house in order to determine the full consideration. The appraisal is a commentary on value -not price

$250,000 purchase price with no existing bond= $250,000 total compensation to be paid
$250,000 " " with $10,000 bond = $260,000 total compensation paid

It is impossible to answer that question without additional information. You should do your own analysis. If you know how long you will be in the house, you can start to put together some numbers. For example, in my case, the bond was $23,483. After 10 years, I will have made payments of $16,160 in interest (non tax deductible), principle, and managements fees and have a bond balance of $19,042. In other words, I will have only paid $4441 towards the principle. The bond fee including management charge is $1616 per year. You can make some assumptions about the future value of the money you would use to pay off the bond. You can also compute the future value of taking the money you would save each year by paying off the bond ($1616) and investing that. If you can itemize your deductions, you can also take out a home equity loan and pay off the bond (at probably a lower interest rate) and the interest will be tax deductible. Nobody can really tell you what makes sense because there are a lot of variables. If you do pay off the bond and then go to sell your house, hopefully the sales agents can explain that the higher price you are asking is compensated for by the lower annual cost since a bond payment won't need to be made. Spreadsheets are useful for running some scenarios.

Definitely not. If you don't pay off the bond, the buyer has two options: pay off the bond or keep it. If you do pay off the bond, the buyer only has one option: no bond. In terms of making a sale, this is a no brainer.

If a prospective buyer has two identical homes to choose from selling at the same price and one has a $15,000 bond on it and the other has no bond - which will the buyer choose?

I purchased a resale with no bond 8 years ago. Perfect home on a golf course. Several friends purchased new homes at the same time with $23,000 bonds. They had to buy items already in a resale like more landscaping, gutters and downspouts, and had less desirable lots.

Resales are the way to go.

Maybe the guy who thinks he lost another amenity will sell his? :shrug:

Your logic is good as far as what is right for you to do financially. But your logic is flawed when it comes time to sell the house. You cannot ask more money just because the bond is paid if there are other equal homes to yours on the market. Bond paid on a house will help it sell faster, but not for a higher price!

If and only if both houses are virtually identical in a virtually identical neighborhood located in a virtually identical location. If I liked the house with a bond more, I'd buy it.

How much value do you put on having an entirely debt free retirement ?- No mortgage, no car payment, no bond, etc. For me the money I make by freeing up the bond even at the expense of loosing some at sale time (but I'm not selling) plus no debt is a wonderful I can sleep at night feeling. Priceless !

I do not think it is wise if you are planning to resell.Potential buyers seem to ignore the fact that the bond has been paid.

:agree:

If you want to spend some money on a house you probably will sell, you might think about spending it on adding popular upgrades and/or updates that you can enjoy while you live there. (Yeah, I know enjoying a paid off bond is the top choice for some owners but when it comes to selling, what a buyer sees usually takes top priority.)

And on the more practical side, a new roof can go further for a buyer than a paid bond. With something like a new roof, the seller has gone through the hassle and the noise so the buyer does not have to.

I think there are many people in TV who could pay off the bond if they so chose but they don't want to--for all those various reasons previously stated in every bond thread ever here on TOTV.

If you are going to keep the bond at least check with a tax professional and see if converting it to a home equity loan would work in your favor.