Mortgage Credit Card payments

ivan_dunne

Hello,

I've been thinking of doing this for a number of years now, but forgot and just recently popped back into my head.

I've got a mortgage @ 50K with 15 years left. My interest is 3.99%.

I've read the T&C's of my mortgage, and can pay off as much as I like, just as long as I don't pay it all off before the full term.

I have applied for a credit card, with 0% interest on purchases for 27 months, as long as I pay the monthly minimum.

I am thinking going to the bank, and say, put 2k onto the credit card, where I can pay off the minimum each month and its not getting interest added on to it, and at the same time, my interest on my mortgage is based off a lower balanced.

Again, I've read the T&C's of the credit card, and nowhere does it say that I cant do this.

I've got money in a ISA, where I can use to pay off the balance on the card if I run into trouble.

If I actually do this, I'll test the water first, say, put on £100 on the card and see what happens with the interest.

Do you think this would work, and if so, you think its a good ideal?

Apart from the interest %, all other figures are made up.

Thrugelmir

Nothing wrong with the idea. Providing you can clear the entire card balance when the 0% ends.

You may make as much money simply selling unwanted items on Ebay and using this to overpay the mortgage.

AnotherJoe

Not sure I'm understanding how your plan would work.
You borrow £2k from the bank and put it on the card? Why does that decrease your mortgage ?

Did you mean you'd borrow £2k from the card and pay off £2k of your mortgage? If so that wouldn't work usually, because they charge you interest for cash withdrawals.

In your case I'd look at getting a cheaper mortgage.

ivan_dunne

AnotherJoe wrote: »

Not sure I'm understanding how your plan would work.
You borrow £2k from the bank and put it on the card? Why does that decrease your mortgage ?

Did you mean you'd borrow £2k from the card and pay off £2k of your mortgage? If so that wouldn't work usually, because they charge you interest for cash withdrawals.

In your case I'd look at getting a cheaper mortgage.

No, instead of going into the bank with money to pay off more of my mortgage, maybe £100 here and there, I would use my card to pay off 2k, where the 2k would be interest free and my balance on my mortgage would be lower.

AnotherJoe

I strongly suspect that the credit card company would regard a payment to a bank as a cash withdrawal and they would charge an interest payment upfront.

I presume "the bank" is who your mortgage is with?

ivan_dunne

AnotherJoe wrote: »

I strongly suspect that the credit card company would regard a payment to a bank as a cash withdrawal and they would charge an interest payment upfront.

I presume "the bank" is who your mortgage is with?

Why do you think it would be classed as a cash withdrawal?

This is no difference between doing this and paying half your food shopping on your card and the rest cash.

amnblog

Forget this idea and just improve your mortgage rate if possible and pay off as much as you can as soon as you can.

AnotherJoe

AnotherJoe wrote: »

I strongly suspect that the credit card company would regard a payment to a bank as a cash withdrawal and they would charge an interest payment upfront.

I presume "the bank" is who your mortgage is with?

ivan_dunne wrote: »

Why do you think it would be classed as a cash withdrawal?

This is no difference between doing this and paying half your food shopping on your card and the rest cash.

Ask the credit card company why. But they will treat the two differently.

Mahsroh

If you really want to do this, the only way I can see it working is to put all your day to day spending on the card (food shopping, fuel etc) over a couple of months and use the unspent cash out of the bank for overpayments.

Not sure i'd recommend it though. Seems a bit risky to me unless you are 100% certain you can afford, and are disciplined to pay it off before the interest free period ends.

AnotherJoe

Mahsroh's idea would work but the savings from your scheme wouldn't be that great. 4% interest on £2k is only £80 a year so that's all your scheme would save and you'd have to keep track of it very carefully. One late repayment or forgetting to renew at the end of the deal, and you'd likely blow more than you saved. I use to do this years ago when rates were much higher but decided after a while the hassle wasn't worth it for me. But at peak I was juggling about £20k between several cards.

You'd be better off just to get a better overall interest rate on the whole deal (your current idea is equivalent to temporarily lowering your 3.99% rate to 3.83% ) unless you have a big ERC penalty, plus overpaying. Every £100 overpayment is equivalent to saving £60 over the life of the mortgage.