[quote=bearishgurl][quote=ahewitson]What happens if I would like to pay off the bond in full? Let’s say I wanted to buy a home in 4S and found out that my portion of the 2 bonds in that area was $60,000 for easy numbers. If I were to write a check and pay it off in full, would I be exempt from the timelines and the potential bond expiration in 2040?[/quote]
Why would you want to do that, ahewitson? Do you plan on keeping the property 29 years (until 2040)? Any potential buyer you later have for your house will EXPECT to pay these bonds for a property located in your area. You will not pay any more for the bonds by paying them twice per year on your property tax bills than if you pay them all up front. Nor do I think it would increase your resale value if you paid them off.[/quote]
Here’s a simple calculation for you BG. Let’s say I was just going to stay in the house for half that time (15 years instead of 29 years). The starting Mello Roos is $5,000 with an annual increase of 2% each year. The schedule would look like this:
By these calculations, You’d only need to own this home for 11 years to break even on your original investment of the mello roos payoff. Additionally, even if you kept this property as a rental investment, you’d end up paying $114,202 after 20 years and $185,256 in 29 years. Who’s to say that you’d keep the home for 30 years as a residence or rental or at all but 300% of the original $60,000 doesn’t sound like too much fun to me.
Now, let’s talk about selling your home. If you were trying to sell your $700,000 house and a prospective buyer was calculating their total monthly mortgage payment on a 20% down conforming 30 year fixed loan with a principal balance of $560,000. Their monthly payment will be $3,005 but if they were to budget monthly for the Mello Roos it would be $3,513 ($3,005 P&I + $508 MR). If a buyer was trying to determine whether they could afford $3,005/mo vs. $3,513/mo do you think my house without MR would be a more attractive purchase to them? Or 5 years later where that same payment would be $3,565 and so on. That $3,500ish payment would be as if your principal loan amount was $650,000 ($90,000 more) because of the MR amount.
I’d be interested to hear a compelling argument NOT to pay off your MR.
