Overpay mortgage with purchase credit card stooze

fanheater

I'm just in the business of remortgaging and paid off all my long term credit card debt in preparation.

In my current mortgage with Halifax I have overpaid some months and underpaid others and actually ended up without any direct debit and just making manual payments.

What I learnt was that the monthly mortgage payment is basically irrelevant in itself. So long as you stay ahead of your monthly payment multiplied by the number of months you've had your mortgage, it doesn't matter whether you make payments or not. So the monthly payment figure is really just the total payment you need to have made by the end of your fixed rate period, divided by the number of months your fix lasts for.

Talking this to an extreme, I am thinking about taking out a new 0% credit card after i get a new mortgage, maxing it out over the next few months with everyday spending and taking that money to overspend on the mortgage, potentially to cover the next two years worth of payments (although I know that interest would accrue all the time, meaning that the amount you need to have paid off would still increase).

The rate of my mortgage is probably about what I could get if I saved the money instead and I would enjoy having the lower mortgage balance. And I am expecting that the 10% over payment limit per year would not be an issue.

I can make no more payments on my mortgage and just pay the credit card off in installments.

Has anyone else done this, is there any reason not to do it and does anyone know how a bank would react if you did it?

Thanks.

johnathan45

Haven't done this myself, but I don't think there is any flaw in the plan as long as you manage the payments within the stipulated dates, etc. Taking it a step further, if your mortgage rate is less than the savings rate of interest offered by some banks, you could save more by using those accounts instead.

foxy-stoat

I would run this past the lender. I am with Halifax as well and I am sure the contract I have says that I need to pay the mortgage every month - say £500 and I can over pay if I want.

If I make a lump sum payment of £6000 next month I am pretty sure I still need to make my £500 monthly payments after that - not take a year off.

My average monthly bills that I can use my credit card for as only food/fuel and maybe my water/waste and council tax - so it would take me 6 months to stooze £6000 - plus maybe £1000 for car and home insurances.

fanheater

Foxy, I can tell you that from my experience the Halifax mortgage is more flexible than you think. I overpaid my mortgage with them by a couple of months' worth of payments from the start because I had some money left over.

The first time I wanted to underpay I called them up and they cancelled my direct debit. I had to call them the following month to start a new direct debit.

They had an exact figure for how much I was 'in credit', I.e how many months ahead I was, and they were more than happy for me to not make another payment until it has evened out.

I do think there is a maximum length of time you can go without paying but I never got close to that. I would expect to keep making 'token' payments any case.

As for using a purchase card, you're right that it would take a few months. Still worth doing though, so long as the lender doesn't mind.

I will ask my new lender how far I can push it, but only after I have the mortgage in the bag.