[rustyp]

Originally Posted by manaboutown

I wonder if the bond interest would remain nondeductible if it could be shown that the unpaid bond principal was used solely to make investments?

Originally Posted by manaboutown

Otherwise, and most likely, the interest paid on the bond remains nondeductible while returns on the investments are usually taxable in one way or another. Of course the more a stockbroker has to invest for a client the more he can make in commission income and management fees if that is how he is compensated.

I don't believe the IRS subscribes to the allocated pile game. Please explain where you have seen this done.

[dewilson58]

Originally Posted by rustyp

[COLOR="DarkOrange"]

I don't believe the IRS subscribes to the allocated pile game. Please explain where you have seen this done.

It's deductible until audit and even then you never know.

[justjim]

I see the Bond and the CDD'S as a good deal for the Developer and maybe not as much a deal,for the residents of The Villages. 0f course, this place may have never been developed without the CDD legislation and The Villages is not the only place in Florida this has been used. Economic development was its purpose and it has served the State of Florida well.

[Bogie Shooter]

Originally Posted by dewilson58

Lots of good advice here.

There are a number of old threads on this topic.

Bottom line..........the answer is maybe.

Your right......see post #2

[Reiver]

It's not that complicated. In any purchase for which you can obtain a loan, if you can invest the money at a higher interest rate, then do that. Other wise, pay off the loan asap.

[Boomer]

Originally Posted by Chatbrat

Remember the rule of 72 @ 7% interest in 10+ years you have paid double the cost of the bond and its still not paid off--so, if you plan on living in your house for more than 10 years--its a no brainer--

I was taught interest keeps some people poor , while it makes other people rich.

Chatbrat,

7%???

Is that number for the sake of your Rule of 72 example or is it actually someone's interest rate on the bond?

Our rate of interest is at 4.25 % and while I realize rates can change, that is nowhere near 7%.

New Villagers reading these many threads might come away confused at best or knee-jerk reacting at worst.

There is not one "no brainer" answer to that eternal question about whether or not to pay off the bond.

There are those who just might want to do something else with that chunk of change it would take to pay off the bond. Owners with unpaid bonds should look at their annual cost and factor in how that makes them feel. Answers will vary and that is as it should be.

There are those among us who have perfectly good brains who might decide to use them differently...........

Catching a boring, solid dividend paying stock at the right time can result in a dividend sometimes upward of 4%, and some companies annually increase the dividend payout.

Additionally, catching an individual stock just right can hold the potential for being able to capture a tidy gain in time. Taxes on gains and dividends are usually easier on investors than ordinary income tax.

Individual investors come in all types, some more adventurous than others. There are investors who might not want to give up having options with the money it would take to pay off the bond. And before somebody pounces, may I say I completely understand there are also excellent reasons for choosing to pay off the bond in certain circumstances -- certain being the operative word.

I do not intend to be arrogant. I am not trying to act like I know best for everybody. All I am saying is there are many people who have plenty of brains who, for whatever reasons, do not choose to pay off the bond.

Everybody's bird in the hand is not the same kind of bird.

[Chatbrat]

7% was based upon a previous poster, we paid our bond one week after closing

[Boomer]

Originally Posted by Chatbrat

7% was based upon a previous poster, we paid our bond one week after closing

Well, alrighty then.

We didn't.

And I am sure each of us made the right decision.

[Villageswimmer]

Originally Posted by Boomer

Chatbrat,

7%???

Is that number for the sake of your Rule of 72 example or is it actually someone's interest rate on the bond?

Our rate of interest is at 4.25 % and while I realize rates can change, that is nowhere near 7%.

New Villagers reading these many threads might come away confused at best or knee-jerk reacting at worst.

There is not one "no brainer" answer to that eternal question about whether or not to pay off the bond.

There are those who just might want to do something else with that chunk of change it would take to pay off the bond. Owners with unpaid bonds should look at their annual cost and factor in how that makes them feel. Answers will vary and that is as it should be.

There are those among us who have perfectly good brains who might decide to use them differently...........

Catching a boring, solid dividend paying stock at the right time can result in a dividend sometimes upward of 4%, and some companies annually increase the dividend payout.

Additionally, catching an individual stock just right can hold the potential for being able to capture a tidy gain in time. Taxes on gains and dividends are usually easier on investors than ordinary income tax.

Individual investors come in all types, some more adventurous than others. There are investors who might not want to give up having options with the money it would take to pay off the bond. And before somebody pounces, may I say I completely understand there are also excellent reasons for choosing to pay off the bond in certain circumstances -- certain being the operative word.

I do not intend to be arrogant. I am not trying to act like I know best for everybody. All I am saying is there are many people who have plenty of brains who, for whatever reasons, do not choose to pay off the bond.

Everybody's bird in the hand is not the same kind of bird.

Ours was 6.125%. Yes--not THAT far from 7%. The rates do not change throughout the 30 yr bond life. Look at your amortization schedule. See what the real cost will be. Don't make a decision based on posts here.

[rustyp]

Let me know if your finance guy advises you to pay it off. Over the years my finance guy has proven himself to be consistent. Buy high sell low. And for that noteworthy advice I gave him a handsome commission.

[Boomer]

Originally Posted by Villageswimmer

Ours was 6.125%. Yes--not THAT far from 7%. The rates do not change throughout the 30 yr bond life. Look at your amortization schedule. See what the real cost will be. Don't make a decision based on posts here.

You are right. There is no right or wrong answer. It's whatever makes sense to the individual owner who has to think it through. There is a lot of info on districtgov.org and it is all probably there somewhere, but lazy me just called and asked the balance and the interest rate.

[patfla06]

I guess it depends on a lot of factors such as bond amount, your age, how long you plan on living in the house, etc.

We debated and after a year paid it off.
Do not like having ANY debt at this age.

[JoMar]

We did not pay it off.....won't live long enough to pay the full bond. The math for us, based on returns on investments, expected life (if I live 30 years don't expect to be in this house at 103) made a payoff not a good move for us. As stated, different personal situations equal different results.

[rustyp]

Originally Posted by JoMar

We did not pay it off.....won't live long enough to pay the full bond. The math for us, based on returns on investments, expected life (if I live 30 years don't expect to be in this house at 103) made a payoff not a good move for us. As stated, different personal situations equal different results.

Is the bond like a mortgage ? Interest is paid on the unpaid balance ? Thus in the beginning little comes off the principal. Did you look at your 30 year analysis from this aspect ?

[rustyp]

Originally Posted by rustyp

Is the bond like a mortgage ? Interest is paid on the unpaid balance ? Thus in the beginning little comes off the principal. Did you look at your 30 year analysis from this aspect ?

Just did a quick calculation - if the bond is paid on the unpaid balance

- a $20000 bond at 6% for 30 years is $120/month
- at the end of 10 years you have paid $11160 in interest
- a $20000 investment at the end on 10 years at 6% yields $15816 interest (a net gain of $4657).