Paying off Mello Roos

[ocrenter]

[quote=sdduuuude]

With me, it’s a logic problem. Either you realize all the gain of buying down the MR or you don’t.

If you have to pay $40K to buy down your MR and you feel you got a $40K discount vs. a comparable property because of it, then you are good. And if that is really the case, then you would honestly get the $40K back when you sell.

But, sdr and others said that you aren’t going to get that $40K back when you sell, so I’m not so sure I believe that you got as much of a discount due to the MR that you think. Your $250K discount was due to the other factors you mention.

Pragmatically, we’ll never know, of course. Who can measure it ? Nobody. The only way to know is if buyers start putting it in the offer letter so you can compare properties against each other.

The neat thing about this thread is – it points out the importance of knowing how buyers and sellers value MR vs. the actual, real cost of it.[/quote]

well, the logic issue is a two step logic.

you are correct, if all things being equal, of course MR is a bad deal. that seems like a no brainer.

but the problem is the nature of the bubble and the nature of the bust. leading to all things are NOT equal.

it is highly unlikely to find a similarly upgraded and updated non-MR home for JUST $40k more than the MR home. The non-MR home, given it is in established neighborhoods that took less beating from the bust, carries a higher than logical premium than MR homes.

So with the above scenario, insisting on ALL MR homes are BAD deals makes very little sense.

[bearishgurl]

[quote=sdrealtor]I think you need to re-read what he wrote and check your math. He wrote maybe $10,000 to $20,000 more for paid off MR on a house with $5400 annual MR (payoff = $58,000). And I think thats a fairly big maybe. His opinion is very much in line with mine that paying them off wont get you close to a dollar for dollar return. A 2 to 4X the annual MR payment seems like a reasonable boost in value for paid off MR but I wouldnt expect more. Paying them off could be a wise choice if you stay long term but most likely wouldnt if you wanted to boost resale value only.[/quote]

Overall, I agree with this statement but not even sure one can recover ANY prepaid MR upon sale, due to 99.9% of the recent surrounding sold comps reflecting sale prices taking into account the MR encumbrance.

[bearishgurl]

[quote=sdrealtor]I dont agree. It screams there is a price to pay to live in a new house in prime area of SD. Personally my MR goes toward improvements to the San Dieguito schools. I think thats a good investment and I am happy to pay the $800 every year. I donate more than that to other charities every year any way. To me this is a tax deductible (at least for now) contribution I make. Unlike the things I give to charities which make me feel good, I actually get some benefit from this.[/quote]

The emphasized portion of this statement assumes that ALL *new* subdivisions built since 1987 in SD County are situated in “prime areas.” NOTHING could be further from the truth, IMO.

Because a property has a MR encumbrance does NOT mean it is located in a “prime” area or even a “desirable” area. It only means its subdivision was built since 1987 with the use of MR bond $$.

[bearishgurl]

[quote=ocrenter]Heres the thing, the difference between a house with no MR and a comparable with MR would not be $840k vs $800k. Similar sized and upgraded and updated homes in established neighborhoods without MR are often times $100-150k above newer homes in MR communities. This differential of course is because of not just lack of MR, but also because of higher % of distress. In these situations, the MR payoff would be fraction of that price difference. Knowing that one can pay off the MR should open people up to buy in MR communities, not stay away from it. Insistence on steering clear from MR with complete disregard to the premium you would have to pay otherwise simply close you off from potential opportunities.[/quote]

I disagree with the emphasized statement, ocrenter. The properties in established areas tend to have a bigger lot, often a MUCH bigger lot. That land in conjunction with its location is what causes the properties in “established areas” have more value than the ones in newer-developed areas. It has nothing to do with the absence or presence of MR. The MR communities in SD County are situated within developer-formed CFD’s on land left over from the “prime land” which was already built upon. It wasn’t built on prior to a CFD formation and the resultant infusion of bond $$ for infrastruction because it was impractical for a developer to do so, mainly due to lack of roads and utilities at the ready.

I agree that the level of distress on a tract directly correlates to the presence of MR there and the amount of MR each parcel is encumbered with.

edit: another factor that adds value to an “established area” over a newer “MR-encumbered area” is mature landscaping. You can’t buy this with any amount of money so its value depends upon the value a particular buyer places upon it.

[UCGal]

[quote=sdrealtor]I dont agree. It screams there is a price to pay to live in a new house in prime area of SD. Personally my MR goes toward improvements to the San Dieguito schools. I think thats a good investment and I am happy to pay the $800 every year. I donate more than that to other charities every year any way. To me this is a tax deductible (at least for now) contribution I make. Unlike the things I give to charities which make me feel good, I actually get some benefit from this.[/quote]
How is paying interest on a long term loan (Mello Roos) beneficial to your community.
Doesn’t paying it off give that same fund the $$ now – so they can make improvements now? And save you the interest payments over the years.

If your goal is stay in the home long term, I see a lot of argument for paying off the MR early and saving the interest payments. Even if it doesn’t translate to an appreciation. It does translate to lower carrying cost for the years you’re there… and that has value.

[Coronita]

Just curious. Anyone considered this in CV?

[sdrealtor]

They get the money now. MR just take care of the debt service. I agree its worth paying off if you are staying long term. To me MR is not so much a part of value but rather an amenity (i.e. money for new schools and infrastructure) with a carrying cost. I get something from that money just like I get something from my HOA fees. Some people value those things and others dont. Its more of a carrying cost. Its a kin to buying a house with a big lot. You pay for the big lot and there is some value for that. However, there is an additional carrying cost to a bigger lot in watering, maintaining, landscaping etc for the bigger lot.

[svelte]

If you are considering paying off the MR early, make sure you take into account something like this happening:

http://www.nctimes.com/news/local/san-marcos/san-marcos-city-refinances-mello-roos-bonds-to-save-million/article_dc6dc077-646e-5d24-ad76-43ae35546ec9.html

It has now happened twice in San Marcos. I’m glad to see the city is looking after the homeowners, it’s the right thing to do.

[Upvote_Anything]

Great discussion.

Did anybody actually pay off the MR? How did that go? Thanks in advance!

[sdnerd]

[quote=Upvote_Anything]Great discussion.

Did anybody actually pay off the MR? How did that go? Thanks in advance![/quote]

Finished paying mine off ~2 weeks ago (4S Ranch).

Painless, but took longer than expected. Factor in a good month to get the payoff numbers. Timing can be important…

I was told the payoff amount of one of my bonds was about to increase 2%, and the other nearly 40% (yes, 40%).

My total was just over $60K. I took out a 5 year, tax deductible 1.9% loan to pay it off.

The net is I have 5 years of slightly higher monthly payments (for the loan) vs a 28 year MR payment that increases 2% annually (avg of $7,500/year MR over that period).

[earlyretirement]

Now that I’m done traveling on vacation and back in San Diego, I’m going to move forward with paying off our Mello Roos taxes.

We definitely will stay in the house for the long-term until the kids are out of the house (15+ years). So it seems like a no brainer to get it paid off.

For those of you that paid it off, on your annual property tax bill with the city, does it still show the CFD on it and just have $0 next to it? Or is it completely vanished from your bill?

I was curious how they have it on the property tax bill once you pay it off. I’ve never known or spoken to anyone personally that has pre-paid it off ahead of time. But I was really curious how it lists on your annual property tax with the city of San Diego.

I’d appreciate if anyone knows.

I’m going to pay mine off here in the next month or so. I’ll report back how the experience went.

[4slive]

I did paid-off last year. I just checked my property tax bill, it shows .00 next to CFD items.

[earlyretirement]

[quote=4slive]I did paid-off last year. I just checked my property tax bill, it shows .00 next to CFD items.[/quote]

Great! Thanks so much 4slive. I really appreciate that. I was always curious about that. It’s good to know about that. Thanks for taking the time to share the info.

[Anonymous]

I just paid my Stonebridge estates Mello Roos today. The annual amount due on my tax bill was approximately $5100. According to the bond agency (or whomever it is that keeps all of this information) this would continue until at least Fiscal year 2034 but could be extended to 2051 if Poway School District issues new bonds. Also it is subject to the 2%/year increase which is all but guaranteed to be added each year. Well guess what, the PUSD is about to issue new debt so had I waited my payoff (Or conversely the term I would have to pay the MR) would be increased. I had to get the payment in by 9/21 to avoid having a higher payoff amount. The payoff was just shy of $57,000. No doubt if I sell in the next 10 years it will be hard to recoup all of this as has been pointed out. On the other hand it gives a pretty solid ROI even if the MR payment period had ended 2034 but looks even better since in all likelyhood the MR will stick with the property for another 30-40 years and increase 2%/year.
I cannot be sure this is a good decision but I will sleep a little better tonight knowing I am out from under this “forever” tax.

[ocrenter]

[quote=sdseeker]I just paid my Stonebridge estates Mello Roos today. The annual amount due on my tax bill was approximately $5100. According to the bond agency (or whomever it is that keeps all of this information) this would continue until at least Fiscal year 2034 but could be extended to 2051 if Poway School District issues new bonds. Also it is subject to the 2%/year increase which is all but guaranteed to be added each year. Well guess what, the PUSD is about to issue new debt so had I waited my payoff (Or conversely the term I would have to pay the MR) would be increased. I had to get the payment in by 9/21 to avoid having a higher payoff amount. The payoff was just shy of $57,000. No doubt if I sell in the next 10 years it will be hard to recoup all of this as has been pointed out. On the other hand it gives a pretty solid ROI even if the MR payment period had ended 2034 but looks even better since in all likelyhood the MR will stick with the property for another 30-40 years and increase 2%/year.
I cannot be sure this is a good decision but I will sleep a little better tonight knowing I am out from under this “forever” tax.[/quote]

Very good info.

How did you find out PUSD is about to issue new bonds? Is there a link? Or was it at a board meeting? Thanks

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