[Arctic Fox]

Originally Posted by RickeyD

Until you need to sell your house. With the bond intact it is then assigned to the new owner. Take out a loan and you eat the whole bond.

OP was for a "forever" situation, but that's a valid point RickeyD

[rustyp]

Originally Posted by Chi-Town

When buying here there was little mention that the bond was paid off. I noticed in the sales sheet that it was listed on the features section, but not knowing anything about buying a house with a bond I never considered it a sales point. It was like OK, that's nice.

I would never pay off a bond early thinking that you would get it or a portion back in the sell price.



Sent from my SM-N910V using Tapatalk

I understand your logic however that's a two sided coin. When I purchased our house I had rented here for several years. I was educated about the bonds. There was a glut of used homes on the market at the time. I told the agent only show me houses with the bond paid off. Also my experience was the price was higher than a house with a bond but perhaps not quite the full value of the original face value of the bond. Thus you might conclude by this scenario that a house without a bond was more marketable. Remember a house is only worth what you sell it for. It's worthless if it isn't selling.

[Barefoot]

Originally Posted by RickeyD

Until you need to sell your house. With the bond intact it is then assigned to the new owner. Take out a loan and you eat the whole bond.

While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.

[Boomer]

Originally Posted by Chi-Town

When buying here there was little mention that the bond was paid off. I noticed in the sales sheet that it was listed on the features section, but not knowing anything about buying a house with a bond I never considered it a sales point. It was like OK, that's nice.

I would never pay off a bond early thinking that you would get it or a portion back in the sell price.



Sent from my SM-N910V using Tapatalk

Good advice, Chi-Town,

Of course, there are those who have recouped the bond pay-off cost when they sell, but depending on that might be taking more of a gamble than putting the money directly into a handful of boring, solid, dividend paying stocks.

I do think what can happen when a house with a paid off bond is for sale is that "no bond" can become the scales-tipper if a buyer likes two houses equally much but only one has a paid bond.

But......depending on the market, a seller with a paid bond often feels the house has to list for a higher amount than its competition--which might fly.....or not. Time is money in real estate or in the market and that money can go either way.

What started me into this thread this time is that I truly believe in the whatever-lets-you-sleep-at-night philosophy when it comes to investing money. The bond decision is an individual one to make and this thread is is a sort of informal study of behavioral economics, a field which I find fascinating.

(Also, I got way into this thread while I was riding shotgun for hundreds of miles--Me and My iPad.)

Anyway, this is one of the better bond threads I have seen around here. I love it when I learn something. And yesterday, I learned how to look up all the interest rates for all the bonds in all The Villages. I had thought everybody's was 4.25% like ours.

[biker1]

Exactly. If someone is looking to pay cash, the issue is do they want additional money in the house or would they prefer to pay the interest, principle, and management fee for the bond each year (essentially financing a portion of the house). For someone financing the house, the higher price (and mortgage payments) of a house with a paid off bond will be offset by not having to pay the interest, principle and management fee of the bond. The annual cash flow should, in theory, be very similar.

Originally Posted by Barefoot

While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.

[Packer Fan]

Originally Posted by golfing eagles

A lot of "voodoo" economics floating around this thread.

First of all, I agree that everyone should do what they think is right for their situation.

I chose not to pay it off, and here is why----

My bond is $28,742 for which I pay $2,004 for 30 years = $60,120

The same $28,742 invested in the stock market for 30 years at the 100 year statistical ROI of 8% ends up being $289,221. (Do the math) Food for thought for those that claim it is a "no-brainer" to pay it off, or suggest that a financial advisor is somehow an idiot for advising a client not to pay it off. But once again, it remains a personal decision for each individual to make.

Sorry to say I disagree with this. You have to assume if you do this that you now take the $2,004 you save by not having a bond payment and dollar cost average it into the stock market at 8% which gives you $248,900 plus the $31,378 you save paying off the bond = $280,278. So basically it does cost you a little bit. However, my experience has been that guaranteeing 8% is crazy, especially in a rising rate bond environment and the stock market at current valuation. Overall, I have to agree the decision is a wash financially, but it does come down to the fact if you pay the bond off, it is a guaranteed return.

I paid mine off right away, but I have a rental, so I can depreciate it as part of the home cost. Slightly different calculation.

[RickeyD]

Originally Posted by Barefoot

While paying off the bond may not increase the value of your home, it might.
Some knowledgeable Purchasers will see it as an important feature.
Many Purchasers don't understand the implications of a high bond, but some do.
So if your bond is paid, it MAY make your home more saleable and desirable than houses that have high bonds.

Easily rectified by advertising to pay off the bond to a willing buyer. Win, win.

[RickeyD]

Originally Posted by Arctic Fox

OP was for a "forever" situation, but that's a valid point RickeyD

If there is anything I've learned in my lifetime is this...there is no forever

[perrjojo]

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

[rustyp]

Originally Posted by perrjojo

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

No it is as simple as this - you save 100%of the interest owed if you pay off the bond. Now you can complicate this buy betting on the cum schemes.

[ColdNoMore]

Originally Posted by rustyp

No it is as simple as this - you save 100%of the interest owed if you pay off the bond. Now you can complicate this buy betting on the cum schemes.

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

[Reiver]

I am laughing at the detail involved in some of these ideas.
If you know how to invest your money, you don't need to ask about paying off the bond or not.
If you don't, this probably isn't the time and place to learn.
So the questions are: Do you want to have an annual payment or some cash in hand right now?
And if you're going to jump from house to house through the years, do you want to keep spending the money every time?

[golfing eagles]

Originally Posted by ColdNoMore

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

I agree. Now I'm REALLY starting to get scared

[Arctic Fox]

Originally Posted by perrjojo

So to follow the logic on some of these posts I must live to be 103 and then I will be ahead if I don't pay off my bond?

yes, but after that it's all money in the bank!

[rustyp]

Originally Posted by ColdNoMore

You do save 100% of the interest, but you also lose 100% of the cash used to pay off the bond...that would otherwise be invested/in the bank.

Cash that might be needed for unexpected expenses...or longevity that exceeds what you've 'planned' for.

///

This is simple also - you just described the case in which one can not afford to pay off the bond.