[Normal]

Originally Posted by Nana2Teddy

We bought new in 2022 and our bond interest is around 3%. We’re definitely not going to pay it off. Interest began to rise significantly right after we bought, so we lucked out.

Late 21-2022 was definitely the best window to borrow any funds for a home purchase or bond. Anyone who wanted to pay off borrowed funds from that time period would be crazy. If you are paying 2-3 percent for a 500 thousand dollar home loan, that same amount in money markets and stocks can earn you about 7% conservatively.

No one I know of would throw that free money away.

[Bill14564]

Originally Posted by Normal

Late 21-2022 was definitely the best window to borrow any funds for a home purchase or bond. Anyone who wanted to pay off borrowed funds from that time period would be crazy. If you are paying 2-3 percent for a 500 thousand dollar home loan, that same amount in money markets and stocks can earn you about 7% conservatively.

No one I know of would throw that free money away.

In addition to the interest on the bond there is the yearly admin fee. This may be negligible at the beginning of the payments but drives the effective interest rate up towards the end of the loan.

I could find no money market account with an interest rate above 5%.

The stock market is up this week but may be down next week. Over time it has increased but there is always the risk of a downturn. On the other hand, the interest and admin fee on the bond will always be there.

I paid mine off with no regrets over throwing free money away.

[Normal]

Originally Posted by Bill14564

In addition to the interest on the bond there is the yearly admin fee. This may be negligible at the beginning of the payments but drives the effective interest rate up towards the end of the loan.

I could find no money market account with an interest rate above 5%.

The stock market is up this week but may be down next week. Over time it has increased but there is always the risk of a downturn. On the other hand, the interest and admin fee on the bond will always be there.

I paid mine off with no regrets over throwing free money away.

I’m sorry, but you are taking things out of context. My returns were about 17% this past year off of Fidelity investments. Yes some money belongs in low yields for security. I certainly wouldn’t pay off a 500k loan at 2.5% when that same money makes me over 80k a year in capital gain. The 7% is a VERY conservative mean in return. Fidelity investments has done quite well over our portions in money markets.

[Bill14564]

Originally Posted by Normal

My returns were about 17% this past year off of investments. I certainly wouldn’t pay off a 500k loan at 2.5% when that same money makes me over 80k a year in capital gain. The 7% is a VERY conservative mean in return.

This year, yes but not 2020, 2022, or 2023.

I have some cash laying around so please name two money market accounts with a very conservative return of 7%.

[Normal]

Originally Posted by Bill14564

This year, yes but not 2020, 2022, or 2023.

I have some cash laying around so please name two money market accounts with a very conservative return of 7%.

I’m not specifically talking JUST markets and CDs, you are. Why be so argumentative about little stuff? There is a place for those investments. When money is piling up, it doesn’t hurt to send some to one of the brokers or just an old fashioned CD. Those still return more than the 2-3 percent on bond payments.

[Plinker]

Originally Posted by Goldwingnut

NO! NO! NO!
The price of the house has nothing to do with the bond amount. It is based on the cost per acre for the area of development times the number of acres in a subdivision divided by the number of homes in the subdivision. The cost of the home has no impact on the amount of the bond.

This post is correct.
Homes within a subdivision may have a golf course view and a pool and therefore a substantially higher home price than one across the street. The bond will be the same.

[mtdjed]

I don't know the costs covered by the bond, but here the word infrastructure. That word would make me think roads, sewers, water etc. All homes in a section would share use of those type of items. That is why price of home is used to allocate bonding rate.

[Nana2Teddy]

Originally Posted by Bill14564

In addition to the interest on the bond there is the yearly admin fee. This may be negligible at the beginning of the payments but drives the effective interest rate up towards the end of the loan.

I could find no money market account with an interest rate above 5%.

The stock market is up this week but may be down next week. Over time it has increased but there is always the risk of a downturn. On the other hand, the interest and admin fee on the bond will always be there.

I paid mine off with no regrets over throwing free money away.

At age 71 hubby and I are definitely not worried about the effective interest rate at the end of a 30 year loan. I doubt we’ll still be here, lol. We paid cash for our home, so the bond is our only payment. We’re happy.

[patfla06]

Zero.
Paid it off after 1st year.

[patfla06]

Originally Posted by Goldwingnut

NO! NO! NO!
The price of the house has nothing to do with the bond amount. It is based on the cost per acre for the area of development times the number of acres in a subdivision divided by the number of homes in the subdivision. The cost of the home has no impact on the amount of the bond.

Exactly!!

[Haggar]

Originally Posted by Maker

I do not think bond interest is deductible if you itemize. Neither is the admin fee. But your investment interest is taxable. You would need a significant higher investment gain than the bond cost to make that beneficial.

Nope - the bond payment on your tax bill (and inclusive interest) are neither deductible as taxes or interest.

[Haggar]

Originally Posted by DAVES

An endless confusion. The bond, you are paying for home support stuff like roads. One way of the other you pay for this as taxes, and or in the price of the home. Sounds like you have a mortgage on your home. The bank can tell you the interest you pay on the bond it is our ours was higher than the interest on the mortgage. You will be told, if you pay it off you will not recover the cost. Not sure that is true. Buying a resale. The SALES PERSON will tell a new buyer that the AC is new or whatever. They try not to open up the bond can of worms. My view. If, you pay 500 for a home and the bond is 30, you paid 530 for the home and the 30 you pay a higher interest on it..
Finances, it always depends. Contrary to my PLAN, we do not itemize so interest is not deductible. Typically as in a mortgage you pay the interest first and then the principal; MATH CONFUSION. If, you pay the interest first and you then decide to pay it off the real interrst you've paid is higher than what you are told-if you ask.

You're not paying the interest first on a standard mortgage.. Assuming you are making fixed monthly payments It's just that in year one the payment you are making goes mostly to interest and a little to principal. Each year the interest goes down and amount applied to principal goes up. On a HELOC you may be paying only interest until you decide to make a payment in excess of the interest due.