Paying off Mello Roos

[paranoid]

ER, you pay a fee but it is waived (deducted) when you pay the total payoff amount to pusd, so effectively it is free.
I’m still amazed by the huge rate they charge: total payoff is $57.5k , but current yearly MR is $5.7k until 2042(?). I believe most people don’t know that they are charged at such a rate.

[ocrenter]

[quote=paranoid]ER, you pay a fee but it is waived (deducted) when you pay the total payoff amount to pusd, so effectively it is free.
I’m still amazed by the huge rate they charge: total payoff is $57.5k , but current yearly MR is $5.7k until 2042(?). I believe most people don’t know that they are charged at such a rate.[/quote]

I back calculated from your numbers. So we are looking at 9.3%.

Assuming you take out a HELOC at 4.5%, to keep the monthly payment the same, it would take 13 years to payoff. Essentially at $480/month. If you just pay $100 more per month, you can pay it off in 10 years.

Assuming you do end up selling in 10 years, you essentially break even and I think it would make a difference with potential buyers.

[sdrealtor]

I have seen homes with paid off MR on the market before. They are more desirable and that helps them sell quicker which is worth something in a declining market. From my recollection they seem to sell for a little more but not a lot more. The premium doesn’t seem dollar for dollar. As a caveat I believe they were in Aviara so the MR fees were modest so the difference probably shouldn’t be much. As a general statement I would recommend paying off MR early for personal benefit rather than being able to sell for more in the future. I’d look at a potentially higher sales price as a bonus but would not factor that in to the decision. Just my opinion though

Edit: thinking a bit more there has gotta be a difference when the annual
MR are 5000 vs 400 so it likely would create more value in a high MR environment. I just think it would be much less than dollar for dollar

[enron_by_the_sea]

[quote=ocrenter]

Assuming you take out a HELOC at 4.5%, to keep the monthly payment the same, it would take 13 years to payoff. Essentially at $480/month. If you just pay $100 more per month, you can pay it off in 10 years.
[/quote]

Hmm.. Aren’t HELOCs these days limited to 80% CLTV? If so, a new/recent buyer can not really use it to buy a house and pay-off Mello-Roos without putting down >20% at purchase. If that is the case then won’t he be better off just putting 20% down and using the rest to pay off Mello-Roos? (instead of putting 20%+50K down and then taking out a HELOC to pay-off Mello-Roos)..

On the same topic, there are slightly older areas in the city (e.g. Scripps Ranch) where houses built in the mid-90s have ~2K/year Mello-Roos which will expire in another ~5years. Once the (majority of ) Mello-Roos for the whole area expires in 2017, might they see a bump in property values? I am guessing that there is a class of buyers for whom any Mello-Roos is a turn-off (there are some on this board. LOL!!!) Suddenly in 2017, this area becomes desirable for them.

[sdrealtor]

I think most MR are for 30 years but maybe some are shorter. Expiration of MR would seem to inccrease value but I doubt on a dolalr for dollar basis as calculated by sdduude (i.e. how much of a mortgage would that cover).

[zk]

[quote=paranoid]ER, you pay a fee but it is waived (deducted) when you pay the total payoff amount to pusd, so effectively it is free.
I’m still amazed by the huge rate they charge: total payoff is $57.5k , but current yearly MR is $5.7k until 2042(?). I believe most people don’t know that they are charged at such a rate.[/quote]

So the quote is only free if you decide to pay it off?

How much is the fee for the quote? Thanks.

[briansd1]

I was wondering the same thing zk.
Would be good to know. Is it and nominal insignificant fee, or is it substantial enough that you would not want to pay the fee if you were not serious about paying off MR.

[ocrenter]

[quote=enron_by_the_sea][quote=ocrenter]

Assuming you take out a HELOC at 4.5%, to keep the monthly payment the same, it would take 13 years to payoff. Essentially at $480/month. If you just pay $100 more per month, you can pay it off in 10 years.
[/quote]

Hmm.. Aren’t HELOCs these days limited to 80% CLTV? If so, a new/recent buyer can not really use it to buy a house and pay-off Mello-Roos without putting down >20% at purchase. If that is the case then won’t he be better off just putting 20% down and using the rest to pay off Mello-Roos? (instead of putting 20%+50K down and then taking out a HELOC to pay-off Mello-Roos)..

On the same topic, there are slightly older areas in the city (e.g. Scripps Ranch) where houses built in the mid-90s have ~2K/year Mello-Roos which will expire in another ~5years. Once the (majority of ) Mello-Roos for the whole area expires in 2017, might they see a bump in property values? I am guessing that there is a class of buyers for whom any Mello-Roos is a turn-off (there are some on this board. LOL!!!) Suddenly in 2017, this area becomes desirable for them.[/quote]

true, but I think in the case of paranoid, the home is already purchased. and also, the HELOC example is just a way to look at borrowing that amount at today’s interest rate, an attempt to do an apple to apple comparison.

[all]

[quote=zk]
So the quote is only free if you decide to pay it off?
How much is the fee for the quote? Thanks.[/quote]

The fee is not the same for all CFD’s. For CFD#6 that covers 4S the fee is $100. Someone mentioned recently that another CFD (Santaluz?) charges $500.

[outtamojo]

The person I talked to about SEH CFD said a ballpark payoff estimate is free but an exact figure will require a fee that can go toward payoff.

[zk]

[quote=captcha]

The fee is not the same for all CFD’s. For CFD#6 that covers 4S the fee is $100. Someone mentioned recently that another CFD (Santaluz?) charges $500.[/quote]

[quote=outtamojo]The person I talked to about SEH CFD said a ballpark payoff estimate is free but an exact figure will require a fee that can go toward payoff.[/quote]

Thanks.

[sdnerd]

Interesting discussion.

I called today to get rough numbers for a 4S property.

4S is in the process of adding more debt to the bonds, so you can’t do a payoff (they won’t have exact numbers) until middle of this year.

The estimate was $60-70K payoff for something that is currently at ~$5,600/year.

Worth considering.

[paranoid]

Fee: in my case, they didn’t charge me anything, because I just asked them for the ballpark number. Then I decided to pay off, and they sent me the exact number (who cares if the 100 or 200 dollar fee is charged or not).

Another point I think people need to be aware is that the MR typically increases year after year. I don’t understand the mechanism why this is the case though. Paying-off the MR thus also avoids future increases.

[ocrenter]

[quote=sdnerd]Interesting discussion.

I called today to get rough numbers for a 4S property.

4S is in the process of adding more debt to the bonds, so you can’t do a payoff (they won’t have exact numbers) until middle of this year.

The estimate was $60-70K payoff for something that is currently at ~$5,600/year.

Worth considering.[/quote]

That would make the current rate around 7.5%. Not quite as high as the 9.3% from paranoid’s MR. Prob a different tract with a different CFD?

[sdnerd]

[quote=ocrenter][quote=sdnerd]Interesting discussion.

I called today to get rough numbers for a 4S property.

4S is in the process of adding more debt to the bonds, so you can’t do a payoff (they won’t have exact numbers) until middle of this year.

The estimate was $60-70K payoff for something that is currently at ~$5,600/year.

Worth considering.[/quote]

That would make the current rate around 7.5%. Not quite as high as the 9.3% from paranoid’s MR. Prob a different tract with a different CFD?[/quote]

I was under the impression everyone in 4S had the main CFD#6, and then possibly additional depending on tract/year/etc. In my case I also have the CFD#6 IAC.

Every bond that I’ve read has a 25 year term, starting at the last issue date. 4S probably has another 2-3 or so years before completion. So we’re looking at ~28-30 years of MR.

It sounded like he was giving me a pretty rough estimate, but he did seem pretty clear that nobody in 4S could pay it off right now as debt was being added. I assume they are in the process of taking advantage of the 2% annual increase headroom.

If $60K removes $5,700/yr (+2% Annual Increases)in expenses it certainly peaks the interest. Sure beats a 1% market account. 🙂

[Author]

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