Is It Still Possible to Pay Off Mortgage with 0% Card

pennypincher3562

Hi

I'm literally only about £2000 away from paying my mortgage off. In April my current deal will expire, and I will be allowed to pay the mortgage off in full without any penalty. I'm pretty desperate to become mortgage free by April, and hopefully resume a 'normal life' afterwards. I've dreamt of becoming mortgage free, for many years.

I was reading a Mortgage Free diary on here, and the poster said:

'In 2003, I applied for my first 0% card and discovered just how easy it was to move the borrowed money into my current account'

I was thinking that would be perfect for me, I'm sure borrowing £2000 on a credit card would't be a big deal. However is still possible to borrow money at 0% on a credit card and then transfer it into a current account in 2014?

Many Thanks
PennyPincher3562

edinburgher

No, I don't think that's an option these days. The world of finance was very different in 2003

£2000 isn't that much money, surely you're not 100% there if you borrow to finish the quest?

pennypincher3562

Hi Edinburgher

It was just a silly idea I had. I suppose you are right in saying the quest isn't really complete if I borrow (even at 0%) to get over the last hurdle. I reckon I'm just getting a bit desperate to see those title deeds coming through the letter box in April. I had actually planned to pay my mortgage off several years ago, and it's dragged on longer than anticipated.

Cheers
PennyPincher3562

edinburgher

Try setting yourself a daily target amount, working well for us

Nearly there, don't get too fixated on a month or two either way.

pharmo_2

Look at the Mbna credit card. You can do super balance transfer to bank account and then pay mortgage off that way.

arbroath_lass

You *could* use a 0% card for normal everyday spending and pay the cash, you would have otherwise spent, off your mortgage. If you have 0% on purchases.

jamesd

Yes, it's possible. The MBNA range do "money transfers" into a current account. However, you do need to check the charge before applying.

A cheaper option would probably be to get a 0% for purchases card and use that for all possible normal spending, using the money spent to pay down the mortgage.

I have seven credit cards, some of which sometimes do interesting existing customer offers for balance or money transfers:

1. NatWest tends to do existing customer offers that gradually get better over time, the best I've seen being 3% fee for 12 months for either balance or money transfer. Balance and not money transfer has been a more common offer in the past.
2. MBNA frequently do existing customer offers for money or balance transfers but usually for around 5% fee. Currently have an offer of 5% for for about 15 months available.
3. Santander just offered me 3% fee for 14 months for balance transfers.
4. Barclaycard seem somewhat similar to NatWest but I don't recall seeing a money transfer offer, only balance transfers.

You can normally beat such existing customer offers with new customer deals. The existing customer ones may be useful depending on how high the interest rates are or what you can make in profit from using the money for something. I'm currently doing things like investing via P2P lending at rates well over 20% so even the relatively high 5% deal is worthwhile taking up if I can invest that money. With a 3% mortgage the rest tend to be about break even for me for that use because the 3% fee is on the whole amount initially borrowed but the monthly payments reduce the amount so the actual APR equivalent is higher then 3%.

At the moment I've around £19,000 borrowed this way. I had something around £30,000 on the cards when I got my mortgage from FD. Very low income multiple, a bit over 1, so they didn't ask me to repay any of it. I explained that I'd made about £12,000 profit on the borrowed money as of about three months before the application.

The existing customer things won't be of interest to you at the moment but might be to others who are considering using cards to cut costs or make money. Really depends on what the various interest or investment rates people have are. Won't make sense for some people, will for others. But the new customer offers are great.

edinburgher

I stand corrected (love jamesd's detailed answers (I wrote 'derailed', must be Freudian!))

In this personal circumstance, however, borrowing to pay the last tranche of a very small mortgage doesn't seem to make all that much sense.

By all means, the OP could start a profitable foray into making money from cards, advice that jamesd has shared before (and I've taken up, over £5k at 0% paying us c. 5% gross at present)

pennypincher3562

Hi All

I think in my instance with the small amount of money left to pay, my best option is to get a 0% card, and use it for purchases so I will have more cash left when it comes to paying off the mortgage in full in a couple of months time.

Thanks, James for a very detailed post. I noted that you are borrowing on 0% cards, and then effectively lending it back out via P2P lending. Is there not a risk you won't get the money back with P2P lending?

Cheers
PennyPincher3562

edinburgher

Is there not a risk you won't get the money back with P2P lending?

There certainly is, but some of the bigger P2P sites have set up funds that take a tiny proportion of monies borrowed to effectively self-insure against borrowers defaulting. I don't believe that any are covered by FSCS protection (as they're investments, not savings).

From memory, I believe that jamesd also uses a variety of sites and lenders are always encouraged to split their funds between borrowers in manageable chunks, reducing your risk of a catastrophic loss should any one borrower decide they can't be bothered paying back what they owe :eek:

I would be intrigued to know where he's getting 20%+ though, I looked at Ratesetter yesterday and the 3 year loans were worse than the best savings rates!

jamesd

pennypincher3562 wrote: »

I noted that you are borrowing on 0% cards, and then effectively lending it back out via P2P lending. Is there not a risk you won't get the money back with P2P lending?

I'm not only using P2P lending, I'm also using normal investments inside a stocks and shares ISA and pension. I've much more invested that way than in P2P, for example I use my full ISA allowance.

I'm not currently keen on most UK P2P firms because their taxable interest rates at the big places tend to be around 5% or so. Compared to that or more on average tax free from investments inside and ISA and the foreign P2P firm isePankur that I'm now using for new money.

To give some idea of why I prefer isePankur, my lending interest rates are averaging well over 20%, I've received around 1400 Euros of interest and have around 95 Euros in loans more than 60 days late, one of which is gradually repaying. I currently have around 13,000 Euros or so lent there. Current estimates are around 300 Euros a month of interest on that money. However, because this receives foreign interest you have to complete a tax return if you use it, so it won't be particularly attractive for quite a lot of people who like a no tax return life. You also have to deal with the risk of changes in exchange rates, which would put off quite a lot of people. Bad debt rates are a bit higher than Zopa on average but the interest rates more than compensate for that. It's perhaps interesting that isePankur in a few recent years has managed to collect about as much as the default amounts and is still collecting more, so bad loans might actually turn out to be profitable, not loss-making, there. At least when lending to Estonians.

So far as other investments go, best to learn more from the investment and/or pensions boards. I just wrote a bit more about what I'm doing in P2P so most people would probably decide that they don't want to do what I'm doing and would go to the more standard investing routes.