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Newer Communities Are More Likely To Have Mello-Roos

Depending on where your home search takes you within San Diego County and the state of California, Mello-Roos may or may not be a consideration.  So, what is it and why should you care?  The short answer is that it is a special tax on homeowners who live in a community that used bonds to pay for the infrastructure within that community.  The Mello-Roos is basically the repayment for those bonds.  When we take our clients around to view homes, Mello-Roos is often viewed as a four-letter word.  Are there advantages to living in a community with this tax?  This post will discuss both sides.

Mello-Roos, also known as the Community Facilities District Act (CFD), comes from the names of its co-authors.  Senator Henry Mello and Assemblyman Mike Roos were instrumental in getting this act passed through the California State Legislature in 1982.  It was developed in response to the passing of Proposition 13 in 1978 which made it more difficult for local governments to use property tax revenue for public facilities and services.  In searching for other options to pay for these services, Mello-Roos was created.  Who decides whether a community will have Mello-Roos?

The community in which this tax is considered decides.  The vote must pass in favor of becoming a Mello-Roos community.  Once the vote passes, bonds are issued to support services such as schools, roads, parks, utility connections, sewer, police, fire and life safety.  Mello-Roos is typically paid annually or semi-annually.  The amount and term length of this tax varies from community to community.  When you break it down on a monthly basis, we’ve seen it as low as $80 per month and in upwards of $400 per month.  The term length of Mello-Roos is, on average, between fifteen to twenty years from the year the community was built. It is important to note that this tax is not the same as property taxes and may not be deductible.  Please check with your licensed tax accountant to confirm this deduction.  As a home buyer, expect to find Mello-Roos in newer communities.  Based on our experience in San Diego County, we have seen a large concentration in eastern Chula Vista (Eastlake, Otay Ranch) and the newer communities within San Marcos just to name a couple.

As stated earlier, home buyers typically have a negative view of Mello-Roos because it cuts into their purchasing power.  This point is valid because, in addition to Mello-Roos, the newer communities also have Home Owner Association fees.  In some cases, the inclusion of both of these fees could increase your monthly costs by $300 to $500.  A home that was affordable can now be out of reach.  On the other hand, there are advantages.  A Mello-Roos community, typically, benefits from the addition of newer schools, parks and community services.  If managed correctly, the money will be in place to support these services today and in the future.  As a home buyer, it is important to weigh both sides of a Mello-Roos community.  In addition to viewing property, make sure you see the services you are supporting with this fee.  If you do not like what you are paying for, that community may not be the one for you.  Please contact us if you would like more information about Mello-Roos communities and how it may effect your home search.  Feel free to search all listings in San Diego County and Southern California as a whole at www.NoBullAgent.com.

Home Buyer FAQ's: Should I Rent or Buy?

People all around San Diego County and, frankly, the United States are looking at their respective markets and trying to decide whether they should buy or rent.  It can be a difficult decision and one that can alter the way you and your family live day-to-day for years to come.  Interest rates are historically low and home prices have dropped (search current San Diego County home prices), but is it the right time for you?  As the summer moving season approaches, let’s discuss the positives and negatives to the question, “Should I Rent or Buy?”

Positives to Owning a Home, Negatives to Renting…

In a “typical” market, home ownership allows you to gain equity over time as you pay down your mortgage and your home value increases.  We cannot ignore that for the last few years the  real estate market in San Diego and most of the country has been far from “typical.”  Depending on who you talk to and where in San Diego County…the market is nearing the bottom, at the bottom or rising from the bottom.  Frankly, there are arguments for and against each.  The point is, I believe San Diego County is entering into a phase where the market will begin on a more “typical” path.  You will not see the equity increases of four or five years ago, but instead a more sustained increase over time.  We counsel all potential and current clients that they should be willing to hold on to their home for at least five years.  If not, now is probably not the best time to buy.  The bottom line is that the opportunity for equity, over the long term, is once again a reality.

In addition to equity, currently, federal and California governments allow you to deduct a portion of mortgage interest and real estate taxes from your yearly income tax.  We recommend you discuss the potential benefits with a certified public accountant to understand how this benefit specifically relates to you as we do not offer tax advice.

Finally, your monthly mortgage payment stays constant in home ownership and monthly rent is at the discretion of your landlord and lease agreement.  That being said, your monthly mortgage payment could increase depending on the terms of your loan.  Adjustable rate mortgages would change your mortgage payment, but these terms are previously agreed upon by you.

Positives to Renting a Home, Negatives to Buying…

Home ownership is a commitment.  Some are not ready for the responsibilities that come with owning a home.  Not being ready does not mean incapable, it simply means that it may not be the right time for you.  It could be financial, family planning or employment future.  All aspects need to be considered before buying a home.  When something breaks in a home, you have to fix it.  If it breaks in your rental, call your landlord.  If after a year of owning your home, you don’t like your neighbors…too bad.  If in a rental, don’t renew your lease and move on to the next rental.

Certainly, one can make the argument, that I am bias towards home ownership.  It’s true…I am.  However, it does not benefit me to be in a position of persuading someone to buy a home.  My job is to offer information, answer questions and ensure that you are able to make an informed decision whatever that decision may be.  Contact us and we are happy to assist you whether you want to buy, rent or just have questions about the entire process all together.