should I pay off my 13,000 pounds mortgage debt with 0% credit card

nursefrantic

Hi all, would appreciate some advice.
Have Abbey mortgage 13,000 pounds left to pay.
Flexi mortgage, have saved and paid off lump sums over 13 years.

Agreed 1 year payments to complete. Interest will be 135 pounds per month.

Negotiated deal with MBNA 2% fee and 9 month 0%. Will be about 1400 per month but a huge saving on the interest paid to abbey.

What do you think? Is this a good idea or is there a catch?
Please advise.
Thanks, nurse frantic

shirlgirl2004

In theory it sounds like a great idea. I guess the only downfall is if, in these uncertain times, something happens which means you can't pay it all off in the 9 months you will be hit with a massive interest rate. It's a risk but as long as you're happy with that then I'd say go for it.

dunstonh

shirlgirl is right. When the deal runs out, the interest will be far more and you wont get a mortgage for £13,000 in future as that is below the minimum of most lenders.

Skint_Catt

And there's no redemption on the mortgage?

Incisor

As it is a flexi mortgage, I am assuming you can withdraw your overpayments while the mortgage is still open. In your position, I would put almost all of the mortgage on the card, but leave the mortgage open, paying off the card as hard as possible. If it all goes wrong, you could then get the capital back from the mortgage to pay off whatever is outstanding on the loan.

It would be worse to end up with a problem putting you into difficulties on the card rather than on the mortgage - because the interest will rack up much more rapidly on a card once interest is charged.

ZARA

i tried to pay off some money on my mortgage with a credit card and the lady said we can not accept credit card as payment, because you cant pay debt with debt, this is a c&g mortgage, is this right?

jamesd

nursefrantic, it seems that your plan is to take the 0% credit card deal now and then pay off the whole amount in one year. If so, your plan makes sense but you should place the money into saving accounts until near the end of the deal instead of paying off the credit card each month. That way you will earn interest on the money while you have it at 0%. Once the deal is about to end, use the savings to pay off the card or seek a balance transfer deal at 0% and retain the savings in a traditional credit card stooze.

Incisor is correct that it's better to keep the mortgage account open with a minimal balance, to reduce the risk if something unexpected happens. Since having a mortgage improves credit ratings you might even want to deliberately keep it open with a low balance until the planned end of its term.

ZARA, if that is the policy of that lender then you could use a credit card deal that allows you to pay cash into a current account, as is normal for MBNA-backed cards like Virgin. Alternatively you could use the card for normal spending and use the cash you might use normally to pay off the mortgage.

Incisor

jamesd wrote: »

... but you should place the money into saving accounts until near the end of the deal instead of paying off the credit card each month. That way you will earn interest on the money while you have it at 0%.

Agree. Oversight on my part. Pay off as hard as possible into a savings account against the debt on the card.

Incisor

ZARA wrote: »

i tried to pay off some money on my mortgage with a credit card and the lady said we can not accept credit card as payment, because you cant pay debt with debt, this is a c&g mortgage, is this right?

The ruling sounds right, but the explanation is wrong. The person receiving the CC payment has to pay a percentage to the card company. Your lender will not tke the hit for this.

Trollfever

MBNA have just offered me 0% until November 2009 on a Platinum Plus Visa Credit Card.

Para 10a of the T&C reads:

We may end this agreement at any time if we write to you first to tell you that we are doing so.

getmore4less

nursefrantic wrote: »

Hi all, would appreciate some advice.
Have Abbey mortgage 13,000 pounds left to pay.
Flexi mortgage, have saved and paid off lump sums over 13 years.

Agreed 1 year payments to complete. Interest will be 135 pounds per month.

Negotiated deal with MBNA 2% fee and 9 month 0%. Will be about 1400 per month but a huge saving on the interest paid to abbey.

What do you think? Is this a good idea or is there a catch?
Please advise.
Thanks, nurse frantic

No catch you get £13k pay £260 fee, pay the min payment every month and save up the rest in a high interest account, then pay the CC off before the 9 months are up.

The saving is probably not as much as you think.

Cash flow will be the only issue since you don't get the full 9 month, takes a few days to get the money and a few days to make sure it is paid off at the end.

Don't forget if you are just paying the mortgage over 12months your interest per month goes down quickly.

Are you sure about the interest being £135pm that works out at 12%.

Have you worked out how much you save?

Use a calculator to work out the cost of the mortgage.
£13k@6% over 1 year is £1119pm and £426 interest

Saving is £166 + whatever you get from the savings.

Mortgage over 9months is a saving of £68+ savings interest.

If you can't save the £13k in 9 months an intermediate option might be to keep a cash ISAs amount back so you don't have to save the full amount in 9months, change the last bit of the mortgage to interest only. The ISA will earn around the same as the mortage costs.