The Bond
 

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

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.

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 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.

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.

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

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 was our thinking !!

No BOND
 

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.

I understand that bonds issued by Greece have hefty returns!

High yields to maturity. But will they mature?

Exactly ! That is what we thought.

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

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.