SBT to pay off a Mortgage ?

fraz_3

Probably been asked a million times before but I can't find the thread

... can an SBT be used to pay off a mortgage? Friend seems to think it can, I'm not sure and would like a definitive answer! ???

many thanks in advance

superhoop

Certainly in my experience.

I have an offset flexible mortgage with First Direct. SBTs I have done in the past have gone straight into my offsetting account.

If you have a flexible mortgage account, stoozing in this way should not be a problem, as long as you can get immediate access to the money.

If you can't access your overpayments, you may have to pay the inflated interest rates at the end of the card's intro period.

Cheers

Steve

Martinslovechild

If you can't access your overpayments, you may have to pay the inflated interest rates at the end of the card's intro period.

Fraz,

This point is really quite important. You MUST check before stoozing into your mortgage that it is FULLY flexible, i.e. allows overpayments / underpayments / payment holidays AND you can request repayment at any time of any amount in your overpayment fund. The last point is especially important - you wouldn't want to max an MBNA card into your mortgage only to find that they'd treated the payment as a capital repayment rather than a deposit into your overpayment fund (because if they do - that's very bad news!!)

Also, if you can't stooz DIRECTLY into your mortgage account, then BT the payment into an Egg Card. From there, move it on to your current account. From there, you should be able to move it onto the mortgage via Switch / Delta / Cheque etc.

dthyer

When I saw the subject "SBT to pay off a Mortgage" I thought this meant paying off the whole mortgage!

Obviously this would be a very risky strategy if you still have a few years to go, as you can't rely on continually getting 0% or even low rate balance transfers (though of course I hope they do continue).

But if you are within a year of your mortgage ending then the risk would be pretty low, particularly if you got a 9 months or more 0% BT deal.

It would be doubly worth doing if you have one of those old fashioned type mortgages where they charge interest for the whole year based on the balance on the beginning of the year. This doesn't make much difference in the early years as you are mostly paying interest rather than capital, and the balance at the start and the end don't differ much. But in the last year it almost doubles the effective interest rate, so could be worth avoiding with a 0% deal.

But I wouldn't be surprised if I've got the wrong end of the stick about what fraz is asking, and superhoop's and MLC's answers are more relevant.

Just a thought,

DT

Walletwatch

Is it accurate to say that this would be effective only if the offset mortgage is treated purely as an overdraft, with debits and credits adjusting the basis amount on which overdraft interest is to be calculated?

Reaper

Is it accurate to say that this would be effective only if the offset mortgage is treated purely as an overdraft, with debits and credits adjusting the basis amount on which overdraft interest is to be calculated?

While I'm not certain I understand the question I think the answer is no. I have a savings account type offset which pretends that you have a positive balance in the savings account. Whether you have one of these or a combined overdraft type the effect is the same - if you put money in your offset it reduces your mortgage interest.

Note that with many of them it has no effect on your monthly repayments by default. You carry on paying the same amount at least until the next annual review. Until then it just means a higher proportion goes towards paying off the capital. However in my case (and I believe many others) you can request an immediate recalculation and get the monthly mortgage repayment reduced if you prefer.

Walletwatch

Thanks for clarifying that, Reaper. So what I would need to ensure, as another post in this chain says, is that the whole of the originally sanctioned loan amount is available to me throughout the tenure of the loan, apart from whatever amount the principal has gone down by, as a result of the monthly repayment. This is my interpretation of the statement that overpayments / underpayments should be allowed into the account.

I consider this roughly as a diminishing overdraft facility extended for the period of the loan, the overdraft limit being equal to the outstanding principal at any point in time. One can bring down the interest amount he pays on such an overdraft by paying money into the account, and reducing the debit balance (or in this case, by paying money into the Savings account that is linked to the mortgage account)

Reaper

Yes that sounds right. The key thing is to make sure you can get your stoozed money back out in case you ever need it. Any mortgage that calls itself an offset will let you do this and most that call themselves flexible.

However the ability to overpay/underpay by itself is not sufficient unless you have checked first that all overpaid money can be withdrawn again at a later date.