[Papa_lecki]

If the bond balances doesnt play into the transaction, why do realtors post it in the property description? It is a feature, like a new pool or new kitchen.

Like any upgrade to a house, you dont get usually 100% back, but there is some value. Probably between 50% and 100%

[Aces4]

Originally Posted by Bill14564

The selling price of the house is $395,000 and the gain is $45,000 regardless of whether you paid off the bond, that is just the market price.

If you paid the $30,000 bond then your net profit on the house is $15,000.

If you didn't pay the bond then you made about $6,000 in payments on that "rented" money over the course of those three years. You passed the balance of that $30,000 bond to the new owner and your net profit is $39,000.

The house sells for the same price either way. The difference is in how much you took out of your bank account during that time.

Am I missing the interest paid portion of the payments factored in this analysis?

[dewilson58]

Originally Posted by Bill14564

I'm not sure it's considered a lien on the property, at least from the mortgage perspective. I'll have to dig out my title paperwork but I don't recall the bond being listed and I'm sure that while the banks for the primary and secondary mortgage insisted on being listed on the home insurance, the bond did not.

It is a lien. Mortgage is subordinate. The bond lien is on the land......doesn't care about the home insurance.

[CoachKandSportsguy]

Oh, I see the confusion. . . people aren't looking at math, they are interpreting the question with a fallacious scenario. people are confusing adding the bond to the selling price, which is not the calculation of getting your bond payment back, nor should it be, that's a stupid concept.

If the price appreciation of the house is greater than the cash paid out on the bond, you get your bond payment back. Nowhere was the point of a stupid realtor saying to add the bond to the price of the house. The house is always priced at market at sale time, I just used zillow as a proxy, as an example which is showing that enough price appreciation will get your bond payment back, which for me was about 2 years at present, so not interested in paying bond payments. . . . My house has enough appreciation in a little over two years to get the bond cash back at time of sale.

and if the price appreciation continues at even slightly less, after 5 years, the cash used to pay off the bond is returned plus. . . so yes, one will get the bond paid off early cash back, for most everyone between 3 and 5 years. . .

sportsguy

[Bill14564]

Originally Posted by Aces4

Am I missing the interest paid portion of the payments factored in this analysis?

The $6,000 in my example is the principle and interest paid on the bond for the three years.

I'm simply looking at the net profit. I sell the house for $45,000 more than my purchase price, that is my gross profit. Now I need to subtract the cash I put into the house. If I paid off the $30,000 bond then my net profit is $15,000. If I didn't pay off the bond then I made yearly payments of principle and interest which are roughly $2,000. Over the course of three years that would be $6,000 paid out for a net profit of $39,000.

In both cases the home has appreciated enough that you will get more money out than you put in. In one case you have $15,000 more and in the other you have $39,000 more. I'll take option B.


NOW, in my case the payoff on the bond is approximately the same as ten times the annual payment. If I plan to stay in the house over ten years then there will be less out of my pocket if I pay off the bond now than if I make the annual payments - it just adds up to less.

Of course, there is the "on the other hand." On the other hand, my money might earn more in investments than the interest I'm paying on the bond. In that case it would make sense to keep the money invested. This calculation will be different for everyone.

[Stu from NYC]

Originally Posted by CoachKandSportsguy

Oh, I see the confusion. . . people aren't looking at math, they are interpreting the question with a fallacious scenario. people are confusing adding the bond to the selling price, which is not the calculation of getting your bond payment back, nor should it be, that's a stupid concept.

If the price appreciation of the house is greater than the cash paid out on the bond, you get your bond payment back. Nowhere was the point of a stupid realtor saying to add the bond to the price of the house. The house is always priced at market at sale time, I just used zillow as a proxy, as an example which is showing that enough price appreciation will get your bond payment back, which for me was about 2 years at present, so not interested in paying bond payments. . . . My house has enough appreciation in a little over two years to get the bond cash back at time of sale.

and if the price appreciation continues at even slightly less, after 5 years, the cash used to pay off the bond is returned plus. . . so yes, one will get the bond paid off early cash back, for most everyone between 3 and 5 years. . .

sportsguy

I would show you the error of your ways but do not like your name calling so will move on.

[Buzzerbaby]

And that's why I'm buying a house that already has the bond paid off. I would rather not have an extra payment that to me, goes to nothing...

[npwalters]

If you want to know if the bond being paid will recoup 100%; try this. Ask a person how much they paid for their house. They almost always give you the figure without the bond.

That same simplistic thinking will apply to the buyers on the back end too.

[Carla B]

We paid the bond off ten years ago. Time goes fast and we're at the point where the amount we'd "lose" if we sold is negligible and nothing to worry about. For us, It was definitely worth it to get rid of the annoying bond.

[dewilson58]

Originally Posted by npwalters

They almost always give you the figure without the bond.

[brianherlihy]

what are the bond on a new Designer Homes down south thank you

[Catalina36]

I recently purchased here in TV. The home I purchased did not have a Bond balance. I personally did not want to purchase a home in TV with a Bond balance. If the home sells for $235,000 with a Bond balance of $10,000 you are paying $245,000 for the house.
Some people may look at it in a way, using the above numbers it depends on how long you stay in the house. If you purchase the house for $235,000 and live there for 5 years and when you sell and the Bond balance is $5000 then you really only paid $240,000 for the house and the balance of the Bond is given to the new owners. The BEST deal is to purchase a resale with no Bond Balance.
Yes, I believe your house has more value and worth more money if your Bond is paid off.

[CoachKandSportsguy]

Originally Posted by Bill14564

NOW, in my case the payoff on the bond is approximately the same as ten times the annual payment. If I plan to stay in the house over ten years then there will be less out of my pocket if I pay off the bond now than if I make the annual payments - it just adds up to less.

paying off the bond if this is your dream house, makes total sense to me.

Of course, there is the "on the other hand." On the other hand, my money might earn more in investments than the interest I'm paying on the bond. In that case it would make sense to keep the money invested. This calculation will be different for everyone.

Making more in investments has a catch though, there asset price increases, or lets call it asset income, and wage income equivalent. If you are making greater than the bond interest rate with dividends, or wage income equivalent, then I would agree. However, buying a house today there really aren't any bond equivalents which are earning that rate of income return. With a dividend equivalent has the risk of the dividend disappearing, or having the asset value going down as interest rates start to rise.

However, if you comparing asset price increase with bond interest, then you have a bit of a mismatch, as one is a income payment and the other is a pretax asset, which is still subject to loss and taxes. The older you are, the less asset price risk one should have.

But each person should have a personalized plan tailored to his / her needs and wants.

[CoachKandSportsguy]

Originally Posted by brianherlihy

what are the bond on a new Designer Homes down south thank you

somewhere between $30K and $40K, and it has nothing to do to the house type, its really added to the land purchase as the cost of the infrastructure to get to land and to support whatever house one builds.

[CoachKandSportsguy]

Originally Posted by retiredguy123

Bond debt and mortgage debt are very different. When you sell your house, potential buyers won't care about your mortgage because it will be paid off at the closing. But, they will care about the bond. Unfortunately, many potential buyers would rather assume the bond debt than reimburse you for having paid it off.

The buyers reimburse you for any or all of the bond paid off through price appreciation of a higher priced house, at market value, over the house cost you paid plus the bond you paid. The particulars of the house has a signficantly larger impact on the market value than the bond. But the willingness of the buyer to pay your price may be influenced by whether there is a bond or not. Most likely, when the market value of two equal size and designed and located houses are the same, the house without the bond will sell faster, but that does not factor the uniqueness of the buyer. Buyers can be irrational as well as sellers, being humans of course.

sportsguy