Before I commit to a stooze....

Maybe_its_because

Hi All,

I was looking for a bit of advice before I make a stooze.

I've just had an accepted application for the Virgin credit card which allows money transfers into current accounts - £5k credit limit for 20 months for 0%. This will cost 4% fee (£180)
So I'll be borrowing £5,180 until Nov 2013.

I was planning to make a payment of £4,500 (or whatever the Virgin max is) as an overpayment to my mortgage which will have a short term effect of, at least, £200 reduction in interest on my mortgage over the 20 months period. It will also have a longer (positive) financial impact on my mortgage interest and reduce my MFD by 12 months. I'll be making other OPs from my salary which will compound this.

To pay it back, I'll pay min 1% payments and have a fixed 4% (before tax) savers account which I set up in January which will have exceeded the remaining balance by Nov 2013.

Would be really keen to get your opinions on maximising this opportunity and whether you think its worth doing.

Thanks, MIB

YorkshireBoy

A £5K limit means a £4,550 to £4,750 money transfer (depending on whether they include the 4% fee in the 95% calculation or not).

You should run your figures through this calculator...

http://www.stoozing.com/calc.php

...first to see if it's worthwhile. This will take into account the effect 20 months of repayments will have on your return.

I suspect the 'profit' won't be substantial, but if it has any secondary benefits (in terms of cashflow etc) then you may still wish to go ahead.

JimmyTheWig

Sounds good, MIB.

Depends on a few things, such as what rate of tax you pay (and if you have a (trusted!) spouse who pays a lower rate of tax than you) and what your mortgage interest rate is.
Am also not quite sure on this 4% fixed savings account. Is the rate fixed at 4% (for how long?) but you can pay money into it whenever you want?

As you are paying this money back in a form of regular savings, you might want to consider the First Direct regular savings account which pays 8%. You need a current account with them, but that's not a bad thing to have.

Presumably you can't (easily) get your overpayments back out of your mortgage. Obviously this isn't a problem as you will be paying the money into savings every month to clear the balance at the end.
But my one concern would be what if circumstances change and you can no longer afford to pay the money into savings. You'd then be stuck with a credit card balance you couldn't pay.

Paying the Stooz pot into savings wouldn't result in this potential pit-fall. Whether this would be worth it or not would depend on what you pay on your mortgage.

Maybe_its_because

Hi Jimmy,

Thanks for your post - I did reply straight away but lost the post so spat my dummy out and didn't rewrite it. Over it now though :rotfl:

Luckily I've been saving up ISAs over the last few years so got a good £15K buffer in case it all goes horribly wrong.

I know it's not a typical stooze, but ultimately if it reduces my MFW by 12 months, then I'm happy. The interest I make on the ISA I'm paying my stooze repayments into is going to come up a couple of quid short of the interest on the stooze by the time the credit card needs paying back. But I'm saving at least £200 in 20 months of mortgage interest, so double whammy. (add to that the compound interest for the next few years until I'm MFW)

I'm just glad that none of you think its a ridiculous idea. (especially as I've now gone and done it....)

Cheers, MIB

JimmyTheWig

Maybe_its_because wrote: »

I know it's not a typical stooze

You're right there. It's riskier than anything that would be allowed on the GIOL board (for those who have been reading Martin's blogs).

Luckily I've been saving up ISAs over the last few years so got a good £15K buffer in case it all goes horribly wrong.

But given this, I'd personally be happy with the risk.
You could look at it that you've saved up £15k in ISAs over the last few years and have decided to pay some of this off your mortgage.
Then you're doing a Stooz, putting the Stooz pot into your ISA.

The only difference is that you're leaving the money in your ISA so as not to mess with your annual allowance. But as far as the risk is concerned it's exactly the same as doing the above.

Maybe_its_because

JimmyTheWig wrote: »

.
You could look at it that you've saved up £15k in ISAs over the last few years and have decided to pay some of this off your mortgage.
Then you're doing a Stooz, putting the Stooz pot into your ISA.

Yes, that makes a lot of sense put that way. Thank you