I think for most retirees in The Villages, their mortgage interest is not really tax deductible either. The higher standard deduction and no Florida income tax makes it more advantageous to not itemize their deductions.

If we come across two equally liked homes with the bond completely paid off on one and the other that still had a bond balance, we would factor in the non-bond home as being a bit advantageous, but would never consider paying a higher price that fully equals the difference in bond balances. As buyers, I don't think we're alone in that viewpoint.

I paid mine off when I bought the house that I currently have lived in for 9 years. I'm glad I paid it off. If I hadn't paid it I would have paid interest all these years and still have owed the bond. The least that will happen if I sell it in the future is it will be a quick sell for someone who wants NO BOND vs what could be a $20,000 bond.

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Don't forget the monthly admin fee.............that greatly impacts your effective interest rate. $$$

Your also paying a carry over fee each year of around 60.00 no one tells you about plus the interest. pay it off anytime I did

Bonds do not affect appraised value of home
 

Whether a bond is paid or not, has no bearing on the appraised value of your home. A bank will not finance a home for more than it is worth. So, don’t think you can automatically sell your home for more than its appraised value just because the bond is paid. The only criteria for paying off a bond is like others have said. Do you get a better return on your investments than the interest rate on your bond? Will you be in your home more less than 10 years? I you answer “yes” to both questions, then do not pay off the bond.

You can see the details of the bond on your home at the following website:

Bond Amortization Schedules

Our alternative was finding a resale with the bond paid off.

bond pay off
 

If you have cash laying around why not.
When they sell you house i think they trickus intp getting the bond.
there is a 100 fee along with he 30 year pay off.
I paid 20500 dollars or so two years ago saving the 5% interest that never goes away.

So brokers are linked to the morse crowd so it is great if the money they make off bonds
keeps going.

so when you sell your house if you do not give the buyer a 5% cost of the bond so i think if you are making money or have money pay it off.

i just sent mortage company 27,500 towards va 4.5 percent mortgage.
to save 200 dollars a month by getting a 2.25 mortgage made no sense.
if i pay 2000 over monthly rate it would be paid off in 10 years.
4000 a month paid off in 2 years.

Sorry i lost track of bond question. Pay it off lowering mortgage payments for me was 150 a month less if you have mortgage. on 20500 balance.

I am happy not to support the morses banks and thei:bigbowr wealth.

Bond
 

You would think two identical homes one with the bond payoff and one without, the one paid off you would get more money. But unfortunately it's not like that you'll probably get a percentage more but not the full amount. It's like two homes one with a new roof and one with a 15-year-old roof. You won't get your full value for buying a new roof. Just like never getting money for the granite you put in

Yes. For my bond, the admin fee is about 0.4% initially with a bond interest rate of just over 5%. It, of course, steadily increases, as a percentage, with time.

You don’t pay the interest up front. A portion of your payment goes to the bond amount each month.

If you aren’t going to stay in your home and may sell and buy again I wouldn’t pay it off as it travels with your house. If you are in your last house until you die I would pay it off as it costs you a lot in interest as well as the bond. Just my opinion

You can find out everything you need to know about the bonds quite easily without having to be told anything. Do your homework.

From a "finance" point of view, the sale of the house recouping an early bond payoff is a simple calculation, but the payoff is a cash flow decision. figure the bond percent of the home purchase price, say 10% and then estimate the annual increase in house pricing, compounding of course, so 5% increase per year, after two years, (1+increase%) ^ number of years = expected increase > 10% . you have recouped your bond pay off in the price of the house. 3% takes about 3 years, 2 % takes about 5 years. Asking real estate agents, whose goal is to sell houses without regard to a specific price level as the impact to them is minimal, may not get a "skin in the game" answer like you have all your "skin in the game"

So do the math, figure the cross over when the house price increase is greater than the house purchase plus bond.

But paying off the bond is a cash flow decision. Can you pay off the bond without impacting your income or your lifestyle significantly? Can you create a temporary saving account and put a fixed amount away each month to save without impacting your lifestyle?

No matter what, tax deductible or not, interest costs reduce your annual income, you can't get around it. Do the math, and if your tax bracket is 20%, you are still losing 80% of the interest in after tax cash flow.

Using the cash for investment income versus paying off the bond and interest has risks as well: the risk is that the income producing stream will continue as long as your bond is not paid off. 20 years ago, you could have 40K in treasuries and get a 5 % interest rate, and you would have thought that situation would be stable indefinately. The point is that there is risk in the income stream, uncertainty that the income stream will remain long enough. There is no uncertainty that the bond payment is due with interest.

So from a finance fiduciary point of view, the best answer is to always pay off the bond ASAP whenever your cash flow scenario can support the payoff. There is no "savings" from not paying if off if you can. There is no free lunch in finance, but there are mental accounting tricks which may convince you there are.

Mental Accounting - Biases & Heuristics | The Decision Lab

or google behavioral finance - mental accounting

Same question: which choice would you make: $10,000 today or $13,000 in a year from now?

Different question: which has the higher cold war ROI: a battleship or a spy?

sportsguy

Aaa, the old refinancing scheme, start all over with high hardly no principle paying towards the loan.

I'm so sure about that. It is now amortized over 20 years. Wasn't the original bond amortized over 30 years?? If so, they essentially pick up at the same point in the bond lifetime but with a lower interest rate going forward.

Not quite. In the beginning it is 1/3 to the bond and 2/3 to interest and admin fee. Amortized over 30 years.

:bigbow:

nevermind.......the prez posted numbers

If you are just buying a house and taking out a mortgage, it your mortgage interest rate is lower than your bond rate, add more to mortgage and pay off bond. If you already own, it depends on what your bond rate is and how much your money is earning for you. If you are earning more than bond rate on your investments, don't pay it off. If you have extra money sitting in a low interest savings account getting, then pay it off. Make sure you won't need that money or else you may need to borrow it later at a higher rate.

Ohiobuckeye
 

That’s exactly what I thought & why I didn’t pay my bond off!

If you do the arithmetic, it’s probably never wise to pay off the bond early.

The municipal bond interest rate on The Villages development bonds is around 5% I think. You certainly couldn’t borrow money to pay off the bond at anything close to the municipal bond rate. Equally certainly, it probably would be easy to earn returns on the investment of the funds needed to pay off the bond before maturity that probably would exceed the bond coupon.

Also as noted above, if you sell your home you won’t enjoy a higher sales price because it is “bond free”. You can list it as a feature of the house, like a view, pool, landscaping, etc., but like any of those features, it’s unlikely that you will benefit in a higher sales price because the bond was paid off.

Unless you simply have a strong resistance to debt, paying off the bond early is probably a bad idea.

Totally Agree. If you earn more (after tax) than the rate on the bond don’t pay it off

Maybe you should go back to the same realtor and ask their view on resale homes that have no bond. Realtors I’ve spoken to all say that’s a plus versus a resale with a bond

Or move to Lake County, no bond.

I’ve already sold 4 homes in villages soon to be 5 and altogether in Florida a total of 10 in 30 years I’ve never put more then 20% down , why waste your money when the interest rate is so low .Paying off the bond if your going to move is never a good idea I never had a problem , you may get a few people who will try to low ball you because of bond but your house will sell for the price it’s worth , one of my homes here sold for more then a neighbors who paid off bond the only difference was s fee upgrades

This question comes up often. If, you call your bank they will tell you the phone number of the office that administrates the bond. I wish I had the number to give you. They were helpful and can give your the right answer to your question as to when. The question is when the interest is applied.
As you will see from other posts, to pay it off of not is not that simple. Is the payment deductible to you? Where will the money come from to pay it off and what are you earning on that money? As to the 6%, it is not negotiable. I may be wrong but we bought new about 8 years ago and it was 5%. On a resale, it may be lower. Do not act on my advice without checking but, I was told the interest rate will renegotiate in two years.
Others posted that the realtors tell you if you pay off the bond you will not get anything more when you sell. In my mind that is a Villages rumor. Think, when you sell you are selling to one person not an average. Say you have a pool. It cost you serious money.
If, I was buying your home I would not want it. Someone else may be thrilled. Same is true of all the commonly done things, landscaping, etc. As to the bond, if I was buying a resale and the bond was paid, it is an added value. If, for example a home needs a roof you would lessen your offer compared to a home where they have a more recent roof.

I agree and disagree with the above. The part about being able to easily earn more than the bond rate through investments is misleading. First, you need to earn more than the bond rate, after taxes. Second, and more importantly, in the current market environment, it is not easy to earn more than the bond rate without taking a fair amount of risk. Interest rates are near zero, so forget about earning your target ROR with relatively risk free bonds, which leaves one investing in much more risky (volatile) investments, at a time where the stock market is hovering at it's all time high and a lot of both economic and political uncertainty. Paying off the bond, is a risk free investment with a guaranteed ROR. I agree that you will probably not recover the full cost of paying off the bond if the home is sold.

My admin fee is about $95 per year. I wonder why the admin fee is less in the example you posted ($60+).

The bond is paid off but the maintenance line item is there forever you never ever get rid of the greed.

No they won’t reduce the interest rate !
That’s just gossip ! TV makes the owners pay for everything. It’s ingenious

Wrong

No greed involved. The annual maintenance fee, about $500 in my CDD, pays for maintenance of various CDD assets.

But you used the villages to sell your house and they charged you 6% when others are only charging 6% now. Everything is negotiable

I took a closer look. It appears that the annual administration fee is about 0.4% of the initial bond amount - the higher the initial bond amount the higher the administration fee. Near the end of the 30 years, this represents a pretty large percentage of the outstanding balance.

The interest rate for our bond will be 3.67%. Why pay it off? I can take that $30k and invest it in something that pays a better return.

I think it’s pretty simple. These assumptions are based on the premise you are never going to move. If you are 70 and have 10 years left on the bond pay it off if you have 15 or 20 years left you just may want to pay yearly. If you are 60 and are in reasonable good health and have 10-20 years left I would pay it off. Anything over 20 it’s probably a crap shoot. If your 55 and can afford it, pay it off. If you are 80 or older. It’s not worth it.

The interest rate is near 7 but is dropping to 3% on February 1st. My payment of 1600 was 1100 in interest