4S Mello-Roos will take 30 more years (2040) to payoff

[ahewitson]

[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:

Years Mello Roos Running Total Mo. Cost
1st $5,000.00 $416.67
2nd $5,100.00 $10,100.00 $425.00
3rd $5,202.00 $15,302.00 $433.50
4th $5,306.04 $20,608.04 $442.17
5th $5,412.16 $26,020.20 $451.01
6th $5,520.40 $31,540.60 $460.03
7th $5,630.81 $37,171.42 $469.23
8th $5,743.43 $42,914.85 $478.62
9th $5,858.30 $48,773.14 $488.19
10th $5,975.46 $54,748.60 $497.96
11th $6,094.97 $60,843.58 $507.91
12th $6,216.87 $67,060.45 $518.07
13th $6,341.21 $73,401.66 $528.43
14th $6,468.03 $79,869.69 $539.00
15th $6,597.39 $86,467.08 $549.78

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.

[bearishgurl]

[quote=ahewitson]…I’d be interested to hear a compelling argument NOT to pay off your MR.[/quote]

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn’t factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn’t think like a “typical Pigg.”

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on “advance MR payments.”

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they’ll still be alive … not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you’re considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD’s by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD’s and thus don’t even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to “reimburse” you for your advance payment)? Do you think you can “recover” up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don’t see an “advance payment” of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

[bearishgurl]

[quote=ahewitson]…I’d be interested to hear a compelling argument NOT to pay off your MR.[/quote]

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn’t factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn’t think like a “typical Pigg.”

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on “advance MR payments.”

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they’ll still be alive … not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you’re considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD’s by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD’s and thus don’t even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to “reimburse” you for your advance payment)? Do you think you can “recover” up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don’t see an “advance payment” of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

[bearishgurl]

[quote=ahewitson]…I’d be interested to hear a compelling argument NOT to pay off your MR.[/quote]

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn’t factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn’t think like a “typical Pigg.”

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on “advance MR payments.”

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they’ll still be alive … not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you’re considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD’s by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD’s and thus don’t even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to “reimburse” you for your advance payment)? Do you think you can “recover” up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don’t see an “advance payment” of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

[bearishgurl]

[quote=ahewitson]…I’d be interested to hear a compelling argument NOT to pay off your MR.[/quote]

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn’t factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn’t think like a “typical Pigg.”

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on “advance MR payments.”

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they’ll still be alive … not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you’re considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD’s by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD’s and thus don’t even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to “reimburse” you for your advance payment)? Do you think you can “recover” up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don’t see an “advance payment” of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

[bearishgurl]

[quote=ahewitson]…I’d be interested to hear a compelling argument NOT to pay off your MR.[/quote]

ahewitson, your calcuations are based upon a few assumptions:

1. That persons who might be interested in making an offer of your home would factor in the MR into their monthly payment. Not all would. The reason so many of those properties with exorbitant MR originally and subsequently sold is because the buyer didn’t factor the cost of MR into their monthly budget. The MR is typically only paid twice per year with property taxes and every buyer doesn’t think like a “typical Pigg.”

2. That you will not be able to make MORE substantial interest (than the 2% the interest on the bonds) in the future on the huge amount you are considering throwing away on “advance MR payments.”

Even if your intention is to keep and even live in the property for 11+ years, I think that is a shortsighted view. Life brings all kinds of twists and turns and frankly, NO ONE knows where they will be in 11+ years or even if they’ll still be alive … not even those who own their principal residences free and clear! I think if you are still young or relatively young, with a mortgage, you should leave your options open and be prepared to get your property ready to sell at any time.

In addition, if your property or the one you’re considering purchasing (with the exorbitant MR encumbrance) is located within well-known CFD’s by the buying public, those buyers who want to avoid paying MR will not even look at it or consider visiting your area to shop in. Your comments in your listing may state that seller has paid off the bonds to a certain date or paid them off entirely, but will potential buyers see this if they know 99% of 92127 is located within one or more CFD’s and thus don’t even look in that area? And for the potential buyers who do see your comment, how much over the sales price of your neighbors (who still owe their MR) will they be willing to pay for your property (to “reimburse” you for your advance payment)? Do you think you can “recover” up to $60K, or even $30K or $10K of your advance payoff of the bonds upon sale??

I just don’t see an “advance payment” of MR working out financially for a property owner. Instead I see loss. Even if you put the $60K into upgrades, I see most of it lost in 4S, due to massive distress. I believe this area has a ways to go before it is out of the woods.

[svelte]

[quote=enron_by_the_sea]
Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. — However my escrow company never really pointed that out to me.
[/quote]

From these two paragraphs, I now know the development where you live. 🙂

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles “site:piggington.com mello roos” or something similar with the particular aspect you’re interested in, you’ll get oodles of threads to read through.

Two that are particularly interesting…this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_analysis

(ps – there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven’t done it, but it would be an interesting case study to see if their resale value has proven to be higher)

[svelte]

[quote=enron_by_the_sea]
Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. — However my escrow company never really pointed that out to me.
[/quote]

From these two paragraphs, I now know the development where you live. 🙂

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles “site:piggington.com mello roos” or something similar with the particular aspect you’re interested in, you’ll get oodles of threads to read through.

Two that are particularly interesting…this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_analysis

(ps – there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven’t done it, but it would be an interesting case study to see if their resale value has proven to be higher)

[svelte]

[quote=enron_by_the_sea]
Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. — However my escrow company never really pointed that out to me.
[/quote]

From these two paragraphs, I now know the development where you live. 🙂

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles “site:piggington.com mello roos” or something similar with the particular aspect you’re interested in, you’ll get oodles of threads to read through.

Two that are particularly interesting…this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_analysis

(ps – there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven’t done it, but it would be an interesting case study to see if their resale value has proven to be higher)

[svelte]

[quote=enron_by_the_sea]
Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. — However my escrow company never really pointed that out to me.
[/quote]

From these two paragraphs, I now know the development where you live. 🙂

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles “site:piggington.com mello roos” or something similar with the particular aspect you’re interested in, you’ll get oodles of threads to read through.

Two that are particularly interesting…this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_analysis

(ps – there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven’t done it, but it would be an interesting case study to see if their resale value has proven to be higher)

[svelte]

[quote=enron_by_the_sea]
Somewhere in that, there was one page saying our Mello Roos for the CFD was expiring in 2016. This was bond issued in 1991 due to be paid off in 2016 per the escrow company.

Recently I digged deeper into this and found that the 1992 bonds mentioned above, were in fact refinanced in 1998. So the new bonds will be paid off in 2020 instead of 2016. — However my escrow company never really pointed that out to me.
[/quote]

From these two paragraphs, I now know the development where you live. 🙂

That development did indeed have the MR refinanced and, as a result, some homeowners saw quite a significant drop in their MR tax.

There were at least a couple of owners in the area that had prepaid their MR, thinking they were being financially wise by avoiding the auto 2% increases. Well, the refi eliminated the yearly 2% increases also. So the owners that prepaid were SOL.

That is why I would not recommend pre-paying.

This is a very popular topic on this site and it comes up every few months. If one googles “site:piggington.com mello roos” or something similar with the particular aspect you’re interested in, you’ll get oodles of threads to read through.

Two that are particularly interesting…this one gives the link to the govt write-up on MR deductibility:

http://piggington.com/mello_roos_fees

And this one explores whether they can be prepaid:

http://piggington.com/san_elijo_hills_analysis

(ps – there are at least a couple of developments in north county where original owners were given the option of prepaying the MR when they purchased. About a quarter did in one development. I haven’t done it, but it would be an interesting case study to see if their resale value has proven to be higher)

[bearishgurl]

I looked at your old links, svelte. It reminded me that I have actually reviewed many homeowner’s tax bills with the various CFD’s listed. Some of these owners owned the same property for more than 20 years. It is true that MR for a school district CFD continues to be collected from the affected property owners (in the form of MR bond pymts) long after the needed schools are built. I recently posted on the “deficit reduction” thread that MR was used to build schools but not run them. That is incorrect. Schools located within CFD’s have better and newer facilities which are maintained better, i.e. landscaping, carpeting, indoor lockers, lockers with built-in locks, swimming pools, larger gymnasiums and cafeterias, indiv sinks in restrooms, separate auditoriums or theatres, bigger, better stadiums, separate showers in the locker rooms, etc. All this costs more $$ to maintain than the older “bare-bones” campus not located within a CFD. However, I do not believe that MR is used for teacher or administrator salaries.

Property owners who pay MR to school district CFD’s may ALSO be paying voter-approved construction bonds to the SAME school and community college districts on the “regular” portion of their property tax bill (that every property owner in their school district pays). The MR bonds they pay to their district are OVER and ABOVE any voter-approved construction bonds and other allocated portions to their school district on the “regular” portion of their tax bill.

[bearishgurl]

I looked at your old links, svelte. It reminded me that I have actually reviewed many homeowner’s tax bills with the various CFD’s listed. Some of these owners owned the same property for more than 20 years. It is true that MR for a school district CFD continues to be collected from the affected property owners (in the form of MR bond pymts) long after the needed schools are built. I recently posted on the “deficit reduction” thread that MR was used to build schools but not run them. That is incorrect. Schools located within CFD’s have better and newer facilities which are maintained better, i.e. landscaping, carpeting, indoor lockers, lockers with built-in locks, swimming pools, larger gymnasiums and cafeterias, indiv sinks in restrooms, separate auditoriums or theatres, bigger, better stadiums, separate showers in the locker rooms, etc. All this costs more $$ to maintain than the older “bare-bones” campus not located within a CFD. However, I do not believe that MR is used for teacher or administrator salaries.

Property owners who pay MR to school district CFD’s may ALSO be paying voter-approved construction bonds to the SAME school and community college districts on the “regular” portion of their property tax bill (that every property owner in their school district pays). The MR bonds they pay to their district are OVER and ABOVE any voter-approved construction bonds and other allocated portions to their school district on the “regular” portion of their tax bill.

[bearishgurl]

I looked at your old links, svelte. It reminded me that I have actually reviewed many homeowner’s tax bills with the various CFD’s listed. Some of these owners owned the same property for more than 20 years. It is true that MR for a school district CFD continues to be collected from the affected property owners (in the form of MR bond pymts) long after the needed schools are built. I recently posted on the “deficit reduction” thread that MR was used to build schools but not run them. That is incorrect. Schools located within CFD’s have better and newer facilities which are maintained better, i.e. landscaping, carpeting, indoor lockers, lockers with built-in locks, swimming pools, larger gymnasiums and cafeterias, indiv sinks in restrooms, separate auditoriums or theatres, bigger, better stadiums, separate showers in the locker rooms, etc. All this costs more $$ to maintain than the older “bare-bones” campus not located within a CFD. However, I do not believe that MR is used for teacher or administrator salaries.

Property owners who pay MR to school district CFD’s may ALSO be paying voter-approved construction bonds to the SAME school and community college districts on the “regular” portion of their property tax bill (that every property owner in their school district pays). The MR bonds they pay to their district are OVER and ABOVE any voter-approved construction bonds and other allocated portions to their school district on the “regular” portion of their tax bill.

[bearishgurl]

I looked at your old links, svelte. It reminded me that I have actually reviewed many homeowner’s tax bills with the various CFD’s listed. Some of these owners owned the same property for more than 20 years. It is true that MR for a school district CFD continues to be collected from the affected property owners (in the form of MR bond pymts) long after the needed schools are built. I recently posted on the “deficit reduction” thread that MR was used to build schools but not run them. That is incorrect. Schools located within CFD’s have better and newer facilities which are maintained better, i.e. landscaping, carpeting, indoor lockers, lockers with built-in locks, swimming pools, larger gymnasiums and cafeterias, indiv sinks in restrooms, separate auditoriums or theatres, bigger, better stadiums, separate showers in the locker rooms, etc. All this costs more $$ to maintain than the older “bare-bones” campus not located within a CFD. However, I do not believe that MR is used for teacher or administrator salaries.

Property owners who pay MR to school district CFD’s may ALSO be paying voter-approved construction bonds to the SAME school and community college districts on the “regular” portion of their property tax bill (that every property owner in their school district pays). The MR bonds they pay to their district are OVER and ABOVE any voter-approved construction bonds and other allocated portions to their school district on the “regular” portion of their tax bill.

[Author]

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