Paying off Mello Roos

[earlyretirement]

Wow. Are you sure it would be a $100,000 payoff on a $540,000 house? That seems quite high. I’m still waiting on an exact payoff on my house.

My house value is double the value of yours and my estimated payoff is around $69,000. But of course there have been 9 years of payments already on it.

Still, $100k payoff seems quite high for that value.

[quote=sdseeker]The insiders guide to Mello Roos. Fascinating reading.
http://www.orrick.com/fileupload/1180.pdf

This is a bit technical but will really disclose the ugly underbelly of
MR. You will see how they are crafted to take advantage of a lack of transparency to the tax payer. If anyone doubts their MR will not increase the maximum 2% per year you should read this. You will also see how they have ability to issue new debt and extend the duration. I know I may not recoup my payoff if I sell anytime soon but I sleep pretty well having eliminated this crazy uncertain annual cost. YMMV.[/quote]

Thanks for taking the time to repost that link sdseeker. I TOTALLY agree with you that there is a clear lack of transparency with regards to taxpayers.

The sad thing is most tax payers don’t seem to want to take the time to care about this issue. Heck, most people don’t even know the APR on their credit card so I don’t think they even know the first thing about how MR works.

Absolutely I agree with you they will raise the taxes the full 2% maximum each year. No way they will leave money on the table.

Taking a closer look at this, I don’t think it makes sense NOT to payoff the MR early if you plan to be in the home for the long term.

Just taking a look it doesn’t look like many people prepay their MR early. I looked at tons and tons of houses online and looked at the taxes on them, and I’ve never come across a house that had prepaid the CFD or at least saw $0.00 on the property tax statement.

Has anyone that has prepaid their MR off then sold their house? I’d be interested to hear how it affected the resale value on their house.

[Anonymous]

Sales price adjustment for mello roos prepayment
I don’t know what impact it has and I accept that likely it could be less than what the payoff cost so unless someone is planning on staying i would not suggest they prepay. My guess is it will depend upon whether it is a buyer’s or seller’s market. In a buyers market you might only get a small premium but likely will be the first one sold and so maybe you catch the higher pricing by selling earliest in a declining market. However in a seller’s market I bet you could get almost full value of the prepayment “if” you can get that reflected in the appraisal or your buyer has plenty of cash for a down payment in case the appraisal does not assign full value to the MR prepayment.

[an]

[quote=earlyretirement]Private school would possibly be an option if I only had 1 child. But with 2 and most likely 3 after next year who in the world wants to spend up to $75,000 to $90,000 a year on private GRADE schools?[/quote]
Is $90k/year really that bad if you’re making $400-500k/year? Also, what about people who spend less on housing to pay for private school. Lets say you’re a couple who can afford a $1.2M house, but you decide to buy a $500k house instead. The difference over 30 years is ~$1.1M. To put 3 kids through private school at $90k/year comes out to be ~$1.1M. So, if you treasure your kid’s education more than you treasure your zip code, then that might be what you’d do. I live in a very middle class area and my neighbor sent all 3 of their kids to private schools. That’s just one example.

[cvmom]

[quote=AN]
Is $90k/year really that bad if you’re making $400-500k/year? Also, what about people who spend less on housing to pay for private school. Lets say you’re a couple who can afford a $1.2M house, but you decide to buy a $500k house instead. The difference over 30 years is ~$1.1M. To put 3 kids through private school at $90k/year comes out to be ~$1.1M. So, if you treasure your kid’s education more than you treasure your zip code, then that might be what you’d do. I live in a very middle class area and my neighbor sent all 3 of their kids to private schools. That’s just one example.[/quote]

Agreed. This is pretty much exactly our situation–much smaller house than we could otherwise afford, but lots of $ spent on private grade school, CTY summer camps, etc. We think it is worth it.

[svelte]

[quote=earlyretirement]
[quote=sdseeker]If anyone doubts their MR will not increase the maximum 2% per year you should read this. [/quote]

Absolutely I agree with you they will raise the taxes the full 2% maximum each year. No way they will leave money on the table.
[/quote]

I just pulled out my tax bill from last year and this year.

My MR went up 1.2%.

[earlyretirement]

[quote=AN][quote=earlyretirement]Private school would possibly be an option if I only had 1 child. But with 2 and most likely 3 after next year who in the world wants to spend up to $75,000 to $90,000 a year on private GRADE schools?[/quote]
Is $90k/year really that bad if you’re making $400-500k/year? Also, what about people who spend less on housing to pay for private school. Lets say you’re a couple who can afford a $1.2M house, but you decide to buy a $500k house instead. The difference over 30 years is ~$1.1M. To put 3 kids through private school at $90k/year comes out to be ~$1.1M. So, if you treasure your kid’s education more than you treasure your zip code, then that might be what you’d do. I live in a very middle class area and my neighbor sent all 3 of their kids to private schools. That’s just one example.[/quote]

Sure, I guess if you’re making $500k a year it would be easier to swallow. But even if you were, that’s still a big chunk of change.

Absolutely in no way, shape or form am I saying private schools aren’t worth it. I’m a by-product of private schools. I went to a LJCDS esque type school from K-8. Very solid education but I much preferred the public school system and very glad my parents let me go to public schools for high school.

Private schools are great but it can be quite a sheltered bubble atmosphere. At least I found that experience growing up and going to private school.

Again, I’m not knocking parents that send their kids to private schools. I’m just saying that I find living in a great public school district well worth it and don’t feel I need to send my kids to private schools.

[quote=cvmom]

Agreed. This is pretty much exactly our situation–much smaller house than we could otherwise afford, but lots of $ spent on private grade school, CTY summer camps, etc. We think it is worth it.[/quote]

CVmom,

That was also the situation with my parents growing up. Smaller, less expensive house but lots of overtime, long hours and sacrifices to send 4 kids to private school.

I am very curious however, CVmom. Do you live in Carmel Valley? If so, the schools are excellent there. I am just curious on parents that live in excellent school districts that still send their kids to private schools.

If I can ask..what is your main motivation? Is it the possible Christian angle if you’re sending your kids to Christian private schools? I was always curious about this with some families that live in great school districts.

For example, one of our neighbors sends his child to a private Christian school and when I asked him the reason he said the only reason was because his child started going to preschool there and made many friends and he didn’t want to disrupt all the friendships.

[quote=svelte]
I just pulled out my tax bill from last year and this year.

My MR went up 1.2%.[/quote]

Great that they didn’t raise it the full 2% last year but do you really think that will stay the trend of not going up the full 2%? I doubt there was ever a year they didn’t go up at least 1%..no?

[cvmom]

Hi ER, yes we live in Carmel Valley, and no we do not send our kids to a religious school. We initially went the private school route when our first child had challenges in preschool. Advanced academically, but behind socially. Needed a lot of individual attention. So when we went to visit our local elementary schools in preparation for kindergarten, we found they were pretty much one-size-fits-all (a quote: we don’t need a gifted program, all of our students are gifted).

At the private school that our kids go to, they have gotten LOTS of individual attention. They are able to accelerate in the areas where they can, which I think is critical to avoid boredom and turning off of the whole school experience. At the same time, they receive individual support in the areas where they need a little extra help. A downside is the “bubble effect” that you mentioned. However, I don’t think there is anything wrong with sheltering kids during those early years. I really like knowing, for instance, that recess is VERY closely monitored, and the slightest hint of bullying is immediately dealt with. I think pop culture has very little of value to offer kids when they are young, so it is great that the school really limited their exposure. They can come up to speed with the “real world” later, when their values are more fully-developed. And they feel so much a part of a community…they like being where “everybody knows your name”. The principal isn’t someone you only see when you are in trouble, it’s someone you see literally every day, and who sits in all of the teacher/parent conferences, and knows you very very well.

My first child is now in high school at Canyon Crest Academy. Made the transition to a large public school with no problem, and is doing excellently with all the AP classes etc. that are available there. But also, has a wonderful peer group and able to interact well in social situations. I am not sure that would have been the case without the investment we made in private school.

I am a product of public schools, and I want to support my neighborhood schools. But even more than that, I am selfish. I want my children to have what I believe is the best education I can provide them. And if that means us living quite a bit below our means, that’s fine with me.

[earlyretirement]

Thanks so much CVmom for taking the time to answer. I really appreciate it. I always love hearing the reasons parents decide to go the private school route when living in good public school districts.

I totally agree with your rational and approach with your situation.

On a side note getting back to Mello Roos taxes. It might be VERY interesting for those of you to note that have CFD #2 (Santaluz) that I just found out that the bond got refinanced last year at a lower interest rate!

I was actually VERY surprised to just get my property tax bill from the City of San Diego and I noticed my CFD actually went down $900+ from last year!

I called in to the administrator to confirm that the bond got refinanced at a lower rate, thereby reducing the annual payments. She said the CFD #2 is still scheduled to be paid off in 2030.

I’m sending off to get an exact payoff balance. The procedures for that are to send in a $500 check to this address below:

David Taussig & Associates
c/o Andrea R.
5000 Birch Street, Suite #6000
Newport Beach, CA 92660

You need to send in a $500 check made payable to the entity listed above. Also, include your Parcel # and request for a payoff quote for CFD #2.

They said they will send in the pay off balance within a week or so. The $500 will be deducted from the pay off amount.

It’s refreshing to hear about them taking advantage of the low interest environment and refinancing this bond at a lower rate. Good to know not everyone is as reckless as Poway!

[svelte]

[quote=earlyretirement]
On a side note getting back to Mello Roos taxes. It might be VERY interesting for those of you to note that have CFD #2 (Santaluz) that I just found out that the bond got refinanced last year at a lower interest rate!
[/quote]

That’s what I was talking about back on June 25th!

It’s probably going to be happening all over with interest rates where they are.

[earlyretirement]

[quote=svelte]
That’s what I was talking about back on June 25th!

It’s probably going to be happening all over with interest rates where they are.[/quote]

Yep. Great call Svelte. It’s great to see them refinancing when interest rates are at such historic lows.

I guess entities all over (except Poway) should be taking advantage of these historic low interest rates. Even with the lower interest rates, it still makes sense to me to pay it off early.

When I asked the administrator what the rates went down from she said on average they were about 5.1% and many of them got refinanced down to 2% to 3% so I don’t imagine they can go much lower.

And doing a back check the CFD #4 looks like they’ve gone up the maximum 2% the past few years.

I was actually wrong that it went down $900 from last year. I was looking at an old property tax bill from the 2010/2011 tax year. It actually went down $550 NOT $900.

Just looking at the past 2 years property tax bills it looks like the CFD #2 was refinanced 2 years ago as well. It’s actually gone down the past 2 years in a row.

[DelSurBird]

Yep $100K is the approximate amount I got via email from the Dolinka Group. Got the same letter to provide my info and pay $100 bucks to get the exact amount for the MR payoff…I agree the $100K payoff is really high compared to the other payoff amounts I am seeing here. No transparency to all of this is disturbing, which is why I came here checking around to compare the numbers and to find out if there’s a watchdog group tracking all of this… apparently not…. is there a possibility the Dolinka Group could be just throwing this number out so people wouldn’t be interested in a high $100K MR payoff to protect their special interests…?? Maybe need to rally community support to demand transparency. Think about what this could do to the bond markets…

[ocrenter]

[quote=DelSurBird]Yep $100K is the approximate amount I got via email from the Dolinka Group. Got the same letter to provide my info and pay $100 bucks to get the exact amount for the MR payoff…I agree the $100K payoff is really high compared to the other payoff amounts I am seeing here. No transparency to all of this is disturbing, which is why I came here checking around to compare the numbers and to find out if there’s a watchdog group tracking all of this… apparently not…. is there a possibility the Dolinka Group could be just throwing this number out so people wouldn’t be interested in a high $100K MR payoff to protect their special interests…?? Maybe need to rally community support to demand transparency. Think about what this could do to the bond markets…[/quote]

sorry guy, Dolinka was very straight up with us. the estimate and the actual numbers were identical. why would Dolinka purposely throw out a high number for Del Sur but not 4S/Santaluz/PQ/Stonebridge?

Del Sur MR have always been several steps higher than everyone elses. I think the $100k reflects reality, I’m afraid.

This is just like the latest jobs numbers. if the data that comes out is not your liking, it must have been a conspiracy by the power-to-be.

[earlyretirement]

Just an update. I went ahead and paid off both CFD’s a few weeks ago. The CFD #4 (Poway Unified) came in around $15,000.

And the CFD #2 for Santaluz fortunately came in at the lower end of their previous estimate of $45,000 to $50,000. I had to pay $500 to get an exact payoff and a few days later they emailed me an exact payoff. It came in about $46,000.

It will be a great feeling to be done with these Mello Roos taxes. We definitely will stay in our house for the long run so this seems to be a no brainer.

[bearishgurl]

[quote=earlyretirement]Just an update. I went ahead and paid off both CFD’s a few weeks ago. The CFD #4 (Poway Unified) came in around $15,000.

And the CFD #2 for Santaluz fortunately came in at the lower end of their previous estimate of $45,000 to $50,000. I had to pay $500 to get an exact payoff and a few days later they emailed me an exact payoff. It came in about $46,000.

It will be a great feeling to be done with these Mello Roos taxes. We definitely will stay in our house for the long run so this seems to be a no brainer.[/quote]

For you, ~$61K is a little over ten years of paying MR by the month. I guess if you’re SURE you’ll be there at least that long, then you definitely got a discount by paying it off early.

Not sure if your early payoff will affect your resale value, though.

[earlyretirement]

[quote=bearishgurl]
For you, ~$61K is a little over ten years of paying MR by the month. I guess if you’re SURE you’ll be there at least that long, then you definitely got a discount by paying it off early.

Not sure if your early payoff will affect your resale value, though.[/quote]

Yep. I’m SURE that we will be in the house for at least 15 years. We have the house exactly how we want it and we have accounted for possibly having another child. So it’s plenty big for us.

We did the renovations we wanted to do and have the house perfect how we want it. We definitely won’t move until the kids are out of high school.

I realize that the majority of people probably aren’t in this position to know for sure they won’t move but I can say with certainty that we will be here for the long haul. And I didn’t do this at all thinking about potential resale value.

[Author]

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