[Laker14]

I'm not sure I buy the argument that if you buy a house that is old enough to have the bond paid off you are going to pay more for maintenance. It is quite possible that the house with the bond paid off has already gone through the stage of life when the HVAC, roof, and water heater, as well as the kitchen appliances, have been replaced.

Perhaps, more than once.

Also, it is not unusual for the home to have been modernized decoratively. More than once.

[Altavia]

Originally Posted by BrianL99

Just stop paying it and see what happens.

So what happens if you stop paying your bond?

[Altavia]

Originally Posted by manaboutown

Disinformation. A bond is debt on the property but it is NOT a mortgage.

Exactly but somebody is not comprehending well...

With a loan, the bank or other creditor takes title of the debtor's property,

You can't sell the home until paying the loan.

A mortgage impacts your score/credit history.

A bond is a debt against the property. But you can sell the property without paying the bond, because it is against the property and carrys over with the sale.

A bond has no impact on your credit history.

[biker1]

It is pretty hard to specifically not pay the bond. If you have a mortgage, your mortgage payment includes funds to escrow for county and school property taxes, bond payment, CDD maintenance fee, and the fire fee. These are all items on your November tax bill that your mortgage company pays for you from escrow. Are you planning on reducing your mortgage payment by the amount of the bond payment and then tell your mortgage company to reduce your November tax bill payment by that amount? If you don't have a mortgage, you receive the November tax bill and are responsible for paying it yourself. Are you going to reduce how much you pay by the bond payment? Essentially, if you don't make your full mortgage payment then you will be hearing from your mortgage company. If you don't make the full November tax bill then you will be hearing from the County. Eventually, you won't be living in the house.

Originally Posted by Altavia

So what happens if you stop paying your bond?

[Topspinmo]

Originally Posted by Travelhunter123

In theory the price of the home where the bond is paid off should be higher than a home still has a bond. In actuality my realtor advised me not to pay off the bond as the resale values seldom reflect the full value of the bond payoff

So you like paying interest. Most of us don’t.

[Topspinmo]

////

[Topspinmo]

Originally Posted by retiredguy123

Did you see the FSBO currently being advertised on TOTV? Price "reduced" to $349K. But, Zillow says it's only worth $321K, and it sold 2.5 years ago for $222K. The house is 24 years old.

FSBO want to cut out realtors fees 6% or more so they are willing to take less than suggested estimate or want price.

Some just want out. So what does that say about your house with bond? Zillow just guess not actual selling price. Sometime they are close either way.

Zillow says my CYV worth 339K I paid 215K 9 years ago

[CoachKandSportsguy]

Originally Posted by BrianL99

Thank you. I love being right.

We all know that, its obvious. . .

Originally Posted by BrianL99

Now please go over to the thread on CDD Bonds. You're a former finance guy. Please explain to the masses, that CDD Bonds are nothing more than mortgages, with a different name and they only relate to land and not homes.

(Once you explain that, then you can move on to how Bond prices fall, when Interest rates rise.)

CDD bonds are not quite mortgages, but from a payer's point of view, the bond looks like or behaves like a mortgage with amortization identical to a mortgage, the payment concept is the same as a mortgage, and a lien against the property with the ability to foreclose against the property, like a mortgage.

A mortgage is a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property. The bond holders do not hold title to the property, and do not lend you the money.

Its really a property improvement assessment fee, funded by a bond, creating a lien on the land. Same as an HOA special assessment fee for an HOA project to improve the entire HOA community after borrowing money. The HOA special assessment in an HOA would be passed to the next owner, but its generally not part of the HOA fee, which is a permanent lease payment on the land.

Special Assessment Tax: A Definition | Rocket Mortgage

In my intuition, TV bonds are not tax deductible because the bond was created by a private entity and not a governmental entity. Would that amount based on the technicality be flagged by the IRS? very, very doubtful in my opinion. Besides, the IRS tends to go after not reporting all your income properly, and less about the expenses, especially with the current personal exemption.

From a finance operational point of view, the bond holders, who lent the money to the villages, expect an interest payment at regular intervals. When a home owner pays off the bond prematurely, the monies go into a fund to keep the principal and generate interest to replace the expected annual payment and fund the future interest rate payments and the bond repayment at the end of the life of the bond. When current interest rates are way below the bond interest rate, the prepayment can cause future payment shortfalls, whereas when current interest rates are above the bond rate, the prepayment holding fund can generate excess interest. . .

This explanation is the way I, as a finance guy and fill out three or four tax returns each year, think about the role and relationship of the TV bond. It may not work for other people. . . or anyone else.

good luck.

[Altavia]

Originally Posted by Topspinmo

So you like paying interest. Most of us don’t.

Do you like earning interest?

If you had a 3% mortgage today, would you pay it off?

Unless you kept that bond money under a mattress, you'd earn more interest investing it.

[Altavia]

...

Originally Posted by CoachKandSportsguy;

This explanation is the way I, as a finance guy and fill out three or four tax returns each year, think about the role and relationship of the TV bond. It may not work for other people. . . or anyone else.

good luck.

Very informative, thanks!

[Altavia]

Originally Posted by biker1

It is pretty hard to specifically not pay the bond. If you have a mortgage, your mortgage payment includes funds to escrow for county and school property taxes, bond payment, CDD maintenance fee, and the fire fee. These are all items on your November tax bill that your mortgage company pays for you from escrow. Are you planning on reducing your mortgage payment by the amount of the bond payment and then tell your mortgage company to reduce your November tax bill payment by that amount? If you don't have a mortgage, you receive the November tax bill and are responsible for paying it yourself. Are you going to reduce how much you pay by the bond payment? Essentially, if you don't make your full mortgage payment then you will be hearing from your mortgage company. If you don't make the full November tax bill then you will be hearing from the County. Eventually, you won't be living in the house.

Exactly, was replying to the "... What happens if you don't pay (just) your bond payment question."

The answer is you can't

You can stop paying your mortgage.

I like CoachKandSportsguy's perspective that "Its really a property improvement assessment fee, funded by a bond, creating a lien on the land."

[Bill14564]

Originally Posted by Altavia

Do you like earning interest?

If you had a 3% mortgage today, would you pay it off?

Unless you kept that bond money under a mattress, you'd earn more interest investing it.

As I asked another poster, what would your calculation have been over the past five years when CD rates were below 3% or in the past few years when market returns were at or below zero? Today, investing the money rather than paying off the bond makes sense. Yesterday not so much and tomorrow is anybody's guess.

Also, don't forget to include the admin fee in the calculation of effective interest rate.

[retiredguy123]

Originally Posted by Laker14

I'm not sure I buy the argument that if you buy a house that is old enough to have the bond paid off you are going to pay more for maintenance. It is quite possible that the house with the bond paid off has already gone through the stage of life when the HVAC, roof, and water heater, as well as the kitchen appliances, have been replaced.

Perhaps, more than once.

Also, it is not unusual for the home to have been modernized decoratively. More than once.

You may find some pre-owned houses like that, but my experience has been the opposite. Most older pre-owned houses I have viewed have not been well maintained or updated.

[Altavia]

Originally Posted by Bill14564

As I asked another poster, what would your calculation have been over the past five years when CD rates were below 3% or in the past few years when market returns were at or below zero? Today, investing the money rather than paying off the bond makes sense. Yesterday not so much and tomorrow is anybody's guess.

Also, don't forget to include the admin fee in the calculation of effective interest rate.

In that case, the effective rate would be the difference between bond interest and CD interest. If the bond was 5%? and the CD 3%, the bond is costing you 2%. And it's not that hard to earn more that CD rates on investments at low risk.

Paying off the bond has high risk you will not recover that money when you sell.

[Topspinmo]

Originally Posted by CoachKandSportsguy

We all know that, its obvious. . .



CDD bonds are not quite mortgages, but from a payer's point of view, the bond looks like or behaves like a mortgage with amortization identical to a mortgage, the payment concept is the same as a mortgage, and a lien against the property with the ability to foreclose against the property, like a mortgage.

A mortgage is a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property. The bond holders do not hold title to the property, and do not lend you the money.

Its really a property improvement assessment fee, funded by a bond, creating a lien on the land. Same as an HOA special assessment fee for an HOA project to improve the entire HOA community after borrowing money. The HOA special assessment in an HOA would be passed to the next owner, but its generally not part of the HOA fee, which is a permanent lease payment on the land.

Special Assessment Tax: A Definition | Rocket Mortgage

In my intuition, TV bonds are not tax deductible because the bond was created by a private entity and not a governmental entity. Would that amount based on the technicality be flagged by the IRS? very, very doubtful in my opinion. Besides, the IRS tends to go after not reporting all your income properly, and less about the expenses, especially with the current personal exemption.

From a finance operational point of view, the bond holders, who lent the money to the villages, expect an interest payment at regular intervals. When a home owner pays off the bond prematurely, the monies go into a fund to keep the principal and generate interest to replace the expected annual payment and fund the future interest rate payments and the bond repayment at the end of the life of the bond. When current interest rates are way below the bond interest rate, the prepayment can cause future payment shortfalls, whereas when current interest rates are above the bond rate, the prepayment holding fund can generate excess interest. . .

This explanation is the way I, as a finance guy and fill out three or four tax returns each year, think about the role and relationship of the TV bond. It may not work for other people. . . or anyone else.

good luck.

Either way it’s still debt you are responsible for till you sell the house or pay it off.