[Skybo]

Whether or not to pay off the bond is a very individual decision based on numerous factors. There is no across-the-board right or wrong answer. I will say this though...I think the “recoupment” estimates I’ve read on this thread are very high, particularly if you sell your home to someone who is taking a mortgage. At least for the time being, the prices (and appraisals) of resales are driven by the new home prices. A home with a paid off bond will only be more attractive and saleable if the price is the same or close to the same as a comparable new home. And a home with a paid off bond is not going to appraise for several thousand more than a comparable home, so even if someone really wants your home, they may not be able to get the financing or have the extra cash to buy your home if you try to add on a large percentage of the bond.

[villagerjack]

Most calculations ignore "opportunity cost", the amount you would receive investing these same funds and the fact that part of your monthly payment includes principal amortization. I left my funds in a Vanguard High Yield Fund instead of paying off my bond and I am confident I am ahead of the game.

[Russ_Boston]

Originally Posted by villagerjack

Most calculations ignore "opportunity cost", the amount you would receive investing these same funds and the fact that part of your monthly payment includes principal amortization. I left my funds in a Vanguard High Yield Fund instead of paying off my bond and I am confident I am ahead of the game.

Thanks for pointing that out. Somehow the previous poster, regardless of how long their post was, seemed to ignore this significant variable. But I can see both sides of the coin since the bond interest is not deductible.

[villagerjack]

Originally Posted by Russ_Boston

Thanks for pointing that out. Somehow the previous poster, regardless of how long their post was, seemed to ignore this significant variable. But I can see both sides of the coin since the bond interest is not deductible.

I would have to look at it more closely but as I remember it when I bought VWEHX the interest I received covered both princioal and interest on the bond. Since then the price of VWEHX has risen substantially and I have a nice profit while over the years the bond has amortized. I could pay off the bond and stll have a nice profit. Point is that it is just not as simple a calculation. Raw numbers just don't tell the story.

[mickey100]

High yield bond funds are very risky. The whole bond market has done well the last few years, but there is no guarantee that will continue. Someone did point out in a previous post that if you could find an investment that paid more than the interest on the (home) bond that you'd be better off going that route, but in this interest rate environment, to find a safe investment that will do so, could be challenging.

[Bavarian]

Originally Posted by KeepingItReal

The interest you earn normally is taxable, the bond interest you pay is not deductible. Bond money I used was sitting in account at less than 1% so it was no big decision. All these points are why what is right for one may not be right for another.

With Quantitative Easiny driving up inflation and causing a good chunk of the DOW increase, we must be preparing for inflation. Interest rates may go up, prices go up and what you have in the way of immovable assets should go up. The Bond may look cheap soon.

[KeepingItReal]

...

[stjames]

the bond has a 6.125% interest, plus $108/year administrative cost fee. It is set up like a mortagage, that is, you pay high interest each year with a small part going to principal. If you wait to pay off a $23,000 bond, you will have paid over $55,000 for it.

[patfla06]

I don't like the idea of paying double over the life of the bond
Plus admin costs.
My husband likes the idea of paying it off so later on (if I'm alone) my costs will be less.
It's an individual decision and not an easy one.

[mickey100]

We felt the same way. Your costs will be less later on, you save a lot of money in the long run, and it makes your house easier to sell.

[asianthree]

When we buy the last house we will pay off the bond

[graciegirl]

Originally Posted by asianthree

When we buy the last house we will pay off the bond

Yep. You are right again.

Graeters breath.

http://www.graeters.com/

[Cantwaittoarrive]

Originally Posted by Golfingnut

It is not tax deductible and yes the interest on it is high. Pay it up front.

I agree. The only caveat I might make is wait a year or two to make sure you are not going to downsize/ upsize then pay it off

[mrsyarbie]

Is it true if you pay off your bond there is still a fee you have to pay $500.00 every year for "maintenance of the infrastucture" ?????

[Russ_Boston]

Yes. But it is not part of the bond itself. Totally separate deal.