[jrref]

Originally Posted by CoupleNCA

We visited the Brownwood TS to introduce ourselves and interest. But the realtor we were assigned on our first in-person visit has refused to answer one of our most basic of questions multiple times (she seems to keep copy/pasting the same answer to my very direct question).

My simple question is this: We've seen several really nice properties that promote the fact that they're "NO BOND". As if it was some huge savings or advantage. I just want to know: "What is the average real-world saving on a property with a bond vs. no-bond?"

The sales brochures shows the monthly fees as "bond+maintenance+fire" so you can't gauge what percentage each makes up.

I totally understand the concept of the bond and I totally understand why each "Villages" bond may differ in terms of price. But we're merely trying to ascertain if a property being highly-promoted as "NO BOND" is really that significant and should be given priority in our choices.

Can anybody please answer this question honestly? My assigned realtor can't or won't.

Mostly everthing said so far about the Bond is true BUT at the end of the day, a house with No Bond is just another selling point like having a pool or a view. A home with a paid off bond will definetly be a couple thousand dollars cheaper to run every year.

Also, those who say I get more interest in the bank so i'm not paying off the bond, on a new or relatively new home you are paying mostly interest just like a regular mortgage so since interest rates won't be this high forever, in a couple of years when they go back down, all you would have done is paid more of the bond interest and very little of the principal.

Bottom line, if you have the money or plan on staying in your home for 5+ years or forever, then pay off the bond. If you plan to move every couple of years then don't.

Also remember even a large $40,000 bond in an expensive home can get easily hidden in a $900 - $1 million dollar home so you can always arrange to re-coup the cost. Most of the older homes 5+ years old have bonds in the $20,000 range. So why pay interest and administrative fees every year?

[Pat2015]

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

That’s why I’ve never paid off the bond on any of the houses I’ve purchased in TV. Paying off the bond does not increase the value of the house.

[retiredguy123]

Originally Posted by charlieo1126@gmail.com

my brand new home in 2007 had popcorn in Virginia trace after the tornado came through and recked it there was no more popcorn

Did you know that popcorn shrimp has no popcorn?

[Bill14564]

Originally Posted by BlueStarAirlines

Risking beating this dead horse any farther.......

A few of the posts in this thread talk about high bond interest rates, but mine its only 3.18% (District 13). My credit union has CDs paying 5.01%. Until those CD rates drop it wouldn't make much sense to use those funds to pay off the bond.
Looking at District 15 their rates are 5.19% for the units listed with their total bonds $50k and up.

When considering a home, it shouldn't just be bond vs no-bond, but also interest rate on the bond.

True, but you also need to add the admin then calculate the effective interest rate for yourself. Because the admin fee is fixed, its impact on the effective interest rate (or cost of money) increases each year. There may come a point where you are actually paying more than 5.01% for the bond.

(Not to mention that it wasn't that long ago that you were not receiving 5.01% at your bank. Things change and what looks like the smart decision today may not have been the best decision last year, or next)

[Bill14564]

Originally Posted by Pat2015

That’s why I’ve never paid off the bond on any of the houses I’ve purchased in TV. Paying off the bond does not increase the value of the house.

But a paid off bond does increase the value of the total purchase (or net value of the house if you prefer).

With enough things being equal I would certainly purchase the home that no longer carried the bond. Of course, it is usually the case that not enough things are equal.

[Pat2015]

Originally Posted by BrianL99

Where did I say it was smart or not smart to pay off a bond?

& if someone sells a home in 3 years, you're right ... he didn't pay $20,000 ... he/she paid the interests & costs and borrowed the money. Those "near 4% Bonds" you mentioned, were a great deal when you could borrow money at 3%, huh?

A bond is just another type of mortgage. You borrow the money and pay it back over time. The exact same considerations someone would make with a mortgage, is exactly what you'd do with a Bond. Weigh the interest rates and do what you think is prudent. It's just a mortgage that's secured differently. As someone else pointed out, it's not backed with a personal guaranty, but backed by it's priority lien, so it's not a "personal debt".

The one and only time I can think of, when a Bond is different than a mortgage from a Buyer's perspective, is when the financing ratio is tight. A Primary Lender who's selling mortgages on the secondary market, has Loan to Value ratios to worry about. A CDD Bond is a slightly different circumstance from that viewpoint. That said, it sort of washes itself out, as it affects income to expense ratios.

I’d rather pay the 4% interest on a 20k bond over three years rather than pay the bond off at closing if I sell in 3 years! Paying off the bond does not increase the appraised value of the property.

[retiredguy123]

Originally Posted by Pat2015

I’d rather pay the 4% interest on a 20k bond over three years rather than pay the bond off at closing if I sell in 3 years! Paying off the bond does not increase the appraised value of the property.

When you sell the house, you don't need to pay off the bond at closing. The buyer automatically assumes the bond payments.

[CoachKandSportsguy]

Originally Posted by Pat2015

That’s why I’ve never paid off the bond on any of the houses I’ve purchased in TV. Paying off the bond does not increase the value of the house.

I agree and disagree with that statement.
Paying off the bond doesn't change the valuation of the house, i agree.
Getting a buyer to pay above the "valuation" may happen just fine due to there being no bond, as a buyer constraint

depends upon the buyer and his/her/their motivation and how the sell price is set, and the competing houses. Fewer houses for sale, motivated buyer, priced above the market, buyers looking for no bond specifically, they might buy it. .

This is not a black and white, yes or no topic.

retired finance guy

I have seen stupid corporations buy over value companies and then go bankrupt on deals I was part of. There are no shortages of buyers whose concept of value is skewed. .

[retiredguy123]

I look at it this way. If I pay off a $20K bond, the best I can do when I sell is to break even by getting a buyer to pay $20K more than the appraised value. But, most likely, I will get less than the $20K. And, if the current CD interest rate is comparable to the bond interest rate, it makes no sense to pay off the bond.

[Normal]

Originally Posted by retiredguy123

I look at it this way. If I pay off a $20K bond, the best I can do when I sell is to break even by getting a buyer to pay $20K more than the appraised value. But, most likely, I will get less than the $20K. And, if the current CD interest rate is comparable to the bond interest rate, it makes no sense to pay off the bond.

The bottom line is financial. Home loans don’t go above appraisals. Bond paid or not paid isn’t consequential to 3rd party observation. Banks don’t give loans above appraisal for good reason. You could ask more, but it really is a buyers market with the supply surplus. At best, you are talking about a carrot on the stick in this market.

[Bill14564]

Originally Posted by retiredguy123

I look at it this way. If I pay off a $20K bond, the best I can do when I sell is to break even by getting a buyer to pay $20K more than the appraised value. But, most likely, I will get less than the $20K. And, if the current CD interest rate is comparable to the bond interest rate, it makes no sense to pay off the bond.

Perhaps today, but what would your calculation have been for the previous five years when CD rates were below 3%? In 2019 would you have made the argument that even though the bond rate was higher than the CD rate you were not going to pay it off?

[nn0wheremann]

“ most folks no longer itemize deductions after the Tax Cuts and Jobs Act of 2017, …”
But this all goes away in 2025. All of the individual tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expire at the end of 2025. Among the changes: Individual income tax rates will revert to their 2017 levels. The standard deduction will be cut roughly in half, the personal exemption will return while the child tax credit (CTC) will be cut.

Time to put on your old Boy Scout hat and Be Prepared!

[ron32162]

NOT A REALTOR is the first thing Village sales people are Sales agents with a real estate license and their principal is the builder not the buyer. You can only buy new homes from the builder here in The Villages.

[Normal]

Originally Posted by ron32162

NOT A REALTOR is the first thing Village sales people are Sales agents with a real estate license and their principal is the builder not the buyer. You can only buy new homes from the builder here in The Villages.

The control issue is tight. Keep in mind they own the closing bank in most cases (Citizens First). The previously owned homes will eventually remove the grip from the market they have. If used homes are cheaper than new homes per square footage the developer has less choices in sales pricing. Once real estate modernizes here with flat rate sales, prices will depreciate further. The Villages won’t have the skimming business through their real estate staff with large bonus percentages per sale.

That said, home prices are moving downward. Interest rates, financial pressures, and primary investment group withdrawals are causing liquidation in the current market here. Then there is the real beast in any retirement community that eventually will come, disinterested heirs who just want liquidations.

[retiredguy123]

Originally Posted by Bill14564

Perhaps today, but what would your calculation have been for the previous five years when CD rates were below 3%? In 2019 would you have made the argument that even though the bond rate was higher than the CD rate you were not going to pay it off?

I hate debt, but I never considered paying off the bond because I don't look at it as personal debt. Paying off the bond just reduces the net sales value of the house.