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Posted by on Apr 4, 2012 in Mello-Roos | 24 comments | Print Print

Paying Off Mello-Roos

Do you dislike the idea of paying Mello-Roos fees?  Now that the State of California has changed the tax forms to ensure you can’t deduct them by accident anymore, would you like to pay them off?

This is what a reader found about paying off his Mello-Roos in advance:

 My MR servicer gave me an estimate of $58,000 payoff on yearly MR of $5400. The total of $5400 is actually from two CFDs. One has interest rate of 5.5% and the other with interest rate of 7.5%.

Total cost of MR over the next 22 years would have been $160,000, including interest and the 2% increases every year.  By paying off now, I’m looking at next 10-11 years of equivalent MR payments, but I think anyone planning on staying put for over 5 years should consider this as an option.

Besides the cost savings, what are other potential benefits?

Are you thinking of selling?  With your CFDs paid off, you’d be able to offer the benefit of “No Mello-Roos” as an advantage over others for sale in your neighborhood.  Rarely do you see newer houses for sale without Mello-Roos – set yourself apart from the rest of the competition.

How much benefit?

By showing buyers how much they are saving in Mello-Roos fees, not only would your home sell faster, buyers would probably pay more – perhaps an extra $10,000 to $20,000 – over others in the neighborhood.

Are you thinking of buying?  Make sure to check how many years are left, and the annual increases.

To get the phone number to the Mello-Roos (CFD) servicer, check the tax bill.

Plug in the address at the link below, and scroll down:



  1. If you’ve got extra equity, it would make sense to suck out equity to pay off your Mello-Roos.

    You’d get a lower interest rate on your loan than on your M-R, plus it’s deductible.

  2. Geez…those are horrible rates. Definitely worth paying off now.

  3. We focused on Aviara for our last move as the Mello Roo’s are low at $800 per year and expire in 2 years. Compare that to the newer tracts in Coastal N. SD County and its lower than all and soon to be done. This was not the only reason but weighed in on our search for sure.

  4. My wife and I purchased a 1995 tract home with no HOA or M-R. It was definitely a BIG selling point for us! We even told our agent at the time that we didn’t even want to look at homes with those extra fees.

  5. This makes for some interesting math.

    The said reader has a MR of 5400/year, that breaks down to $450 per month of extra obligation.

    A buyer (as well as his loan officer) will look at that and say, that reduces your purchasing power by $95000 ($450 = $95000 at 4% over 30 years).

    Therefore, a house that has the MR paid off will be able to increase its buyer pool by essentially increase their purchasing power by almost $100k.

    If someone is staying in that home for long term, beyond 5-10 years, and there’s a ways to go on the MR obligation, this sounds like a no brainer!

  6. 105 mill is definitely a lot different than a billion. I’m sure the seller is impressed with the math skills.

  7. #6 – now that’s funny!

  8. I’m glad they made sure showing is by appointment only!

  9. From the description….”This home is so quiet on the inside you can hear a pin drop.”

    The peace and quiet of this house will help you to focus on the noise of the Detroit River running past your front door.

    The bubble hasn’t popped hard enough if this kind of laziness still persists real estate.

  10. I predict the next round of pricing would be $10,500,000 perhaps?

  11. Yes, and he sure is keeping the attention on it. By the time he gets to the right price, it will look like a smoking deal!

  12. $1.05 is too much for that location…gives new meaning to “easy freeway access”! What is this agent thinking…Oh, sorry, for most agents that is not a requirement for starting the day.

  13. Jim: doesn’t the MLS have a buzzer that goes off when the listing values seem to be out of touch with the past sales/values? This is unbelievable that it actually got into the MLS system — and both times the price is not just wrong, but massively off the mark!

  14. 90% off of that house. The bottom must be in.

  15. The 2000 sales price on that house is $570k. Assuming a 2001 price for the bottom, that house should be sold for about $650k.

  16. I live on the other coast. (But I still enjoy reading this stuff and viewing the videos. Go figure.) Ya made me look up “Mello-Roos”. 🙂

  17. Was there a formal declaration that 2001 pricing is the bottom? Yikes, that means we have another 25%+ drop to go in some areas in Carlsbad. Thanks for the heads up, I better get out now…

  18. No, no formal declaration. That was just the price point that I was comfortable with. In early 2003 was when I detected the bubble, meaning, it had already gone up for a year from 2002 prices. My purchase was a late 2001 price point, assuming that the prior sellers didn’t buy it in 2002 for an inflated price.

  19. Jim, the price is down to $1M now. Let’s hope the realtor’s next job is not at NASA….

    Paying off Mello Roos is interesting, especially if it’s 7.5%. Better than paying down mortgage or putting money in the bank.

  20. Any chance one can pay off the HOA and not have to live by their rule?

  21. “Any chance one can pay off the HOA and not have to live by their rule?”

    Technically, I suppose, I should think this could be incorporated into the HOA rules if the majority of the homeowners in the association voted for it.

    So I guess the question becomes: what do most of your neighbors think of this idea?

  22. So the developer makes even more return by shoving the Mello roos cost down the buyers throat.

    What a terrible law put through by special interest development community. The developer should bear the cost of all installation..

    Hey why not make a Roofy lous and make every one pay for the installation of their roof….


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