Confused

scomsw

Martinslovechild wrote: »

Around mid-2003, I discovered 'stoozing'; as I would discover, this was to play a very big part in my clearing the mortgage. 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, from where I used it to first clear my wife's car loan (remember, I couldn't overpay the mortgage by more than 10% at this time). Once my wife's car loan was fully on 0% (this took 3 credit cards in both mine & my wife's names), I applied for further 0% cards to clear my own car loan. I then ensured that I paid the full 10% mortgage overpayment by borrowing even more cash, all of it at 0%.
quote]

I'm slightly confused. Were you getting the maximum cash from the credit cards and then putting it into a high interest account? Presumably you were paying both the mortagage and the cards off at the same time.

I am wanting to reduce my mortgage and I am thinking of doing the same, even with the 3% charge for cash transactions. I am thinking that to the pay the mortgage off with the interest rates as they are will still be better even though the cards are charging the 3% handling fee.

Any advice on this would be useful.
Many thanks

Shelley

Martinslovechild

scomsw wrote: »

Were you getting the maximum cash from the credit cards and then putting it into a high interest account? Presumably you were paying both the mortagage and the cards off at the same time.

I obtained the maximum cash from each of the credit cards by transferring a (non-existent) balance from my Egg Card. I then Balance Transferred a (non-existent) balance from my Current Account to my Egg Card, therefore reducing my Egg Card balance back down to £0. As I then had £Thousands in my Current Account, I would telephone the Mortgage Lender and ask to make an overpayment - this cash would be added to my Flexible Overpayment Fund, thereby reducing the amount of interest I paid (quite substantially!). I never used a High Interest Savings Account; this would have eroded my gains as I would have needed to pay tax on any interest received.

For instance, had I received 6% gross in a Savings Account, then I would have received 4.8% as a basic-rate taxpayer or just 3.6% as a higher-rate taxpayer. In other words, after paying the 3% BT fee, the potential gains are minimal.

If you instead pay the cash into your mortgage overpayment fund, you do not receive any interest on it; instead, you don't pay interest on your mortgage for the portion of cash in your overpayment fund. For example, if your outstanding mortgage = £80,000 but there's £30,000 in your overpayment fund, then you'll only pay interest on the difference between the two (£50,000), saving you a fair chunk. Because you're offsetting the £30,000 against your mortgage rather than investing it in a Savings Account, there's therefore no tax to pay, therefore it's equivalent to receiving the amount of mortgage interest as a net savings interest amount, i.e. if your mortgage charges 6%, then you're effectively earning 6% net on £30,000 in our example; this is equivalent to 7.5% gross for a basic-rate taxpayer or 10% for a higher-rate taxpayer - there's simply no bank in this country that will give you those kind of returns on cash (certain current accounts excepted which impose a very low maximum investment and stringent rules).

In answer to your second point, I did pay off the cards & the mortgage concurrently. I set a monthly budget of what I was prepared to pay towards the mortgage and this included credit card minimum payments. Some months ate up quite a lot of cash on minimum payments as you can imagine. If you're unable to pay minimum payments on top of your mortgage, you'll need to ensure that you can withdraw money easily from your mortgage overpayment fund to ensure that the minimum payments are met on-time every time!

scomsw wrote: »

I am wanting to reduce my mortgage and I am thinking of doing the same, even with the 3% charge for cash transactions. I am thinking that to the pay the mortgage off with the interest rates as they are will still be better even though the cards are charging the 3% handling fee.

It's definitely do-able. If they're charging 3% and your mortgage charges 6% then it's a no-brainer. It's effectively like having a mortgage which charges a fixed-rate of 3% for the proportion of your outstanding balance in the overpayment fund.

There are a good number of accounts now that offer fully flexible arrangements - you MUST ensure that there is a drawdown facility so that should a credit card need to be cleared and you cannot transfer the balance onwards, you can get at the cash easily.

scomsw

Many thanks for the explanation and advice. My mortgage advisor is due a visit and I will attempt to get the most flexible mortgage I can. I will let you know how I go on. I am going to attempt to pay the mortgage off in 5 years or even sooner so watch this space!

scomsw

Thanks to Martin's Love Child (who is obviously older than Martin or though he says) I am now on the way to becoming a MFW! I have seen my mortgage advisor today and chosen a mortgage which allows overpayments with no penalties. There are no charges to remortgage and the interest rate is lower than what the Halifax can offer even though I am a customer of theirs.

I have got a new credit card which allows me to put money into my bank account and which I can pay off interest free for 12 months. I have increased my credit limit and I am able to wipe £7000 off the mortgage immediately and can pay the £7000 off interest free for 12 months. I intend to change cards next year to transfer the balance.

My mortgage will be £63,500 and I intend to overpay every month for which there are no penalties. But, I have also wiped off 6 years off the original term! The term for the special interest rates is 3 years. My intention is to get more credit cards and I would like to be in a position where I only have to take one other mortgage out whilst at the same time slashing a further £20,000 off by using credit cards.

It might be that I could pay this off in 5 years which will be fantastic. I will keep you all informed of my progress. I have just had a pay rise and despite the fact that the interest rates are high at the moment in comparison to when I took this current mortgage out I can still throw money at the balance. I'm looking forward to the challenge and ready for battle.

If you haven't done so already I would highly recommend the MBNA card.

mountainlioness

I'm really sorry to jump in on this but am still confused!

"I obtained the maximum cash from each of the credit cards by transferring a (non-existent) balance from my Egg Card. I then Balance Transferred a (non-existent) balance from my Current Account to my Egg Card, therefore reducing my Egg Card balance back down to £0."

Why does that still leave 1000s in the current account?

Please can someone explain this to me in easy terms! Sorry to be dim!!

jamesd

mountainlioness, a balance transfer pays money into the account the balance is being transferred from. The other credit card transfers loaded lots of cash onto the Egg card, trasnferring money to it to pay off the fictional debt balance.

The balance transfer of the current account's fictional overdraft transferred the cash from the card into the current account.

Martinslovechild

Or to put it another way...

At the start, let's make these assumptions

• Current Account Balance = £0
• Egg Money Balance = £0 [credit limit = £5,000]

Let's say I now apply for the BigBucks Visa. They offer me the card with a £5,000 credit limit and 0% for 12 months on Balance Transfers.

So, I now have:-

• Current Account Balance = £0
• Egg Money Balance = £0 [credit limit = £5,000, APR 7.9%]
• BigBucks Visa Balance = £0 [credit limit = £5,000, APR 0% on BTs]

I call BigBucks Bank and request a Balance Transfer from my Egg Money card for £5,000

So, I now have:-

• Current Account Balance = £0
• Egg Money Balance = £+5000 [credit limit = £5,000, APR 7.9%]
• BigBucks Visa Balance = £-5000 [credit limit = £5,000, APR 0% on BTs]

Notice that my Egg Money card is in credit at this point.

I now log into the Egg website and request a Balance Transfer from my Current Account to my Egg Money card.

So, I now have:-

• Current Account Balance = £+5000
• Egg Money Balance = £0 [credit limit = £5,000, APR 7.9%]
• BigBucks Visa Balance = £-5000 [credit limit = £5,000, APR 0% on BTs]

So you see, we've effectively 'moved' £5000 from BigBucks to my Current Account. Once the cash is in my Current Account, I can move it onwards to my mortgage overpayment account, a high-interest savings account or wherever really.

As I owe BigBucks £5,000 at this point, I must pay them the minimum payment each month (somewhere around 3% per month) and repay the balance after 12 months so as not to incur any charges.

And that's about it really. Hope this helps.

Martinslovechild

scomsw wrote: »

Thanks to Martin's Love Child (who is obviously older than Martin or though he says)

scomsw wrote: »

I am now on the way to becoming a MFW! I have seen my mortgage advisor today and chosen a mortgage which allows overpayments with no penalties. There are no charges to remortgage and the interest rate is lower than what the Halifax can offer even though I am a customer of theirs.

I have got a new credit card which allows me to put money into my bank account and which I can pay off interest free for 12 months. I have increased my credit limit and I am able to wipe £7000 off the mortgage immediately and can pay the £7000 off interest free for 12 months. I intend to change cards next year to transfer the balance.

My mortgage will be £63,500 and I intend to overpay every month for which there are no penalties. But, I have also wiped off 6 years off the original term! The term for the special interest rates is 3 years. My intention is to get more credit cards and I would like to be in a position where I only have to take one other mortgage out whilst at the same time slashing a further £20,000 off by using credit cards.

It might be that I could pay this off in 5 years which will be fantastic. I will keep you all informed of my progress. I have just had a pay rise and despite the fact that the interest rates are high at the moment in comparison to when I took this current mortgage out I can still throw money at the balance. I'm looking forward to the challenge and ready for battle.

If you haven't done so already I would highly recommend the MBNA card.

Good Man!! Very Well Done.

In a couple of months, start looking at additional cards which will help you in your quest. In November/December, I reckon there'll be a few 0% offers to tempt people in time for Christmas - apply for a couple of cards at this point; hopefully, if you can get an additional £15,000 worth of credit cards with 0% offers, the minimum payments will be £450 per month (assuming 3%) but you'll shave a fair chunk of interest off your mortgage (you'll pay interest on just £48,500 of your mortgage in this example). Even after BT costs, you'll still be making profits in the £hundreds.

If you could afford the £450 per month minimum credit card payments in the above example, then treat these payments as mortgage overpayments - by the end of the year, you'll have paid off £4,587 (source: WhatsTheCost.com) and you'll only need to withdraw £10,413 of the original £15,000 to clear your 0% cards. This is what I did and was a major factor in me clearing my own mortgage.

Very Best Wishes.

mountainlioness

Got it! Thanks! Great explanation MLC

miss_corerupted

ahh i see now, really confused at the begining!!

So do i need to not be in debt in my credit cards and current account??

Martinslovechild

miss_corerupted wrote: »

So do i need to not be in debt in my credit cards and current account??

No - it simply means that if you are, then you may wish to consider moving only the portion of BT you've transferred from BigBucks Visa onwards to a savings account which exceeds your existing overdraft.

For example, let's assume:-

Current Account Balance = £-1000


After the BigBucks -> Egg Money -> Current Account transfer, you'll have a balance of £5,000 in BigBucks and £4,000 in your Current Account (i.e. £-1000 + £5000).

I would then suggest you move the remaining £4,000 into a savings account. As for the £1,000 overdraft that you previously had, you've effectively 'moved' this debt to BigBucks and are now paying it off at 0% for the next 9 or 12 months !!

Good eh?