Mello-Roos and the Markets

We are in such an interesting market right now. It feels a little like the world in general. There are the haves and the have-nots, and in real estate, that applies to listings. 

Some properties are still getting multiple offers, while others are sitting with no offers at all. Interest rates are climbing again this morning, and who knows where gas prices are heading this week. Between rates, Insurance, HOA dues, Mello-Roos, and buyer fear, it does not take much to make a buyer pause. 

Yesterday, I was speaking with a concerned buyer who was looking at a home with Mello-Roos. Once we looked at the numbers, the Mello-Roos was about $200 per month. 

The house was built in 2012, so depending on the original term of the bond, the Mello-Roos may be around for another 6 to 16 years. That sounds scary to a buyer until you explain what it really means. 

In simple mortgage math, an extra $200 per month is roughly equivalent to buying a house that costs about $31,000 more. 

So instead of looking at the Mello-Roos as some horrible mystery fee, you can help the buyer compare it properly. 

If the home is $1,000,000 with $200 per month in Mello-Roos, that may feel similar from a payment standpoint to buying a home around $1,031,000 with no Mello-Roos. 

If the Mello-Roos is $500 per month, that could be similar to buying a home about $75,000 more expensive. So a $1,000,000 home with $500 per month in Mello-Roos might compare more closely to a $1,075,000 home with no Mello-Roos. 

That does not mean the buyer should ignore it. It means they should understand it. 

There are really a few ways to look at Mello-Roos: 

The buyer can pay the extra monthly amount and know that it will eventually go away. 

They can compare that home to a more expensive one without Mello-Roos and decide which makes more sense. 

They can ask escrow to pull a demand, usually for a fee, to find out what it would cost to pay off or buy out the Mello-Roos bond upfront. 

In this case, I told the buyer that the buyout could be somewhere in the $12,000 to $25,000 range, but that depends on the current bond balance, interest rate, and remaining term. Escrow would need to pull the actual demand to know the real number. 

And here is the part that often gets overlooked. In most cases, Mello-Roos is part of the property tax bill. I am not giving tax advice, but the reality is that most accountants do not break down the tax bill and say, "This part counts, but this part does not." Buyers should always confirm with their tax professional, but that is another conversation worth having. 

The main point is this: Mello-Roos does not have to kill the deal. 

As real estate agents, it helps to explain that every $100 per month in Mello-Roos or HOA dues is roughly equal to about $15,000 in purchase price. That is not perfect math, because rates and terms change, but it is a great way to help buyers understand the payment impact.

 So yes, Mello-Roos can matter. But it does not always mean the buyer should run. Sometimes it just means the property needs to be compared correctly. 

In this market, buyers are looking for reasons to be afraid. Our job is to slow them down, explain the numbers, and help them make a smart decision instead of an emotional one. 

So for now, the Mello-Roos world is pretty mellow. 

Interest Rates

Not a good start to the week. Friday was ugly, and today is already uglier! Hoping to turn this tanker around.   

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s and now low 6’s
• Conventional (≤ $832,750): low to mid 6s
• High-balance: mid to high 6s
• Jumbo: Mid to high 6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Bridge loans (~7.99%)
• Buydowns (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Fix and Flip Loans  

Rates subject to change without notice.

Condo Update

• Good news: None today
• Bad news: The Madisons / Madisons at Town Center look really bad at this point!  

We love your Non-Warrantable Condo loans!!

Need help checking a condo? Call me, and we can look it up in real time.

Also:

Full California "naughty list" available here:

https://mikemeena.com/non-warrantable-condos/

Let's Connect

If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,