Paying off my mortgage using a 0% credit card?

LKAY

Hi - advice please.
I owe £5100 on my mortgage. I pay 2.89% interest. I am tied in for another 12 months. I pay approx. £490 per month. I would like to clear my mortgage now and am considering applying for a 0% credit card and paying off the remainder in one lump sum (with early payment fees it will be approx. £5300), and paying this back over the next 8 months (£660/mth).
Can anyone think of a reason why this is not feasible or a good idea?
I have never had a credit card before but the MSE calculator shows I am 80-100% likely to be accepted for many of the 0% ones.
I am also financially stable and can easily afford to pay my monthly payments. Once cleared, I intend to cancel my credit card as I don't really like "credit" but I am willing to use it only for the purpose of paying off my mortgage early.
Any help, advice gratefully received.
Thanks

[Deleted User]

LKAY wrote: »

Can anyone think of a reason why this is not feasible or a good idea?

Two main reasons.

You're unlikely to get a 0% card if you have limited credit history

Mortgage lenders generally don't accept card payment unless you are in arrears.

Oh, also the ERC, if you are 'tied in' to your rate.

Money_Rollercoaster

Why the big rush?


What's the total saving once you've taken into account the early redemption fee (£200) and the money transfer fee money that the CC provider would charge (probably another £100)? I bet it isn't much and there's even a chance that by refinancing using the CC could cost more ...


Oh, and if you check with your mortgage provider, you can probably shorten the term by overpaying - most likely up to 10% of your outstanding balance without any penalty.

mrmagooooooo

Yeah id just give them a call and see how much you can overpay each month. The credit card route doesn't seem worth it at all. You probably wouldn't save anything.

Ben8282

From a purely financial point of view your plan makes little sense and would probably end up costing you more in the long run. You would also need a money transfer card as you cannot bt to a mortgage account.
However, it that is what you want to do, perhaps because you want to remove the charge from the mortgaged property or another valid reason, there is nothing wrong with your plan as such so long as you are able to repay the 0% balance before the promotional period ends.
If your outstanding mortgage balance is only £5k then presumably you are a homeowner with a substantial equity and your credit files will reflect this. I find it so hard to imagine people with mortgages etc who say they have never had a credit card in their life. I seriously wonder how they cope. Like others I wonder if you will be able to get a 0% card with no credit card history but I think that your homeowner status and almost fully repaid mortgage will perhaps give your chances a boost.

LKAY

Many thanks for your responses. Food for thought.
On balance, I have decided to continue for the next 12 months and let it run to its natural end.
This is mainly because I don't want to take out a credit card (don't believe in them!! )


Thanks again for your useful input.

[Deleted User]

LKAY wrote: »

I don't want to take out a credit card (don't believe in them!! )

I've seen them. They definitely exist.

LKAY

:T Ha, I like it - not in my world

newship

Ben8282 wrote: »

From a purely financial point of view your plan makes little sense and would probably end up costing you more in the long run. You would also need a money transfer card as you cannot bt to a mortgage account.
However, it that is what you want to do, perhaps because you want to remove the charge from the mortgaged property or another valid reason, there is nothing wrong with your plan as such so long as you are able to repay the 0% balance before the promotional period ends.
If your outstanding mortgage balance is only £5k then presumably you are a homeowner with a substantial equity and your credit files will reflect this. I find it so hard to imagine people with mortgages etc who say they have never had a credit card in their life. I seriously wonder how they cope. Like others I wonder if you will be able to get a 0% card with no credit card history but I think that your homeowner status and almost fully repaid mortgage will perhaps give your chances a boost.

You 'seriously wonder how they cope' It's very simple, each month spend slightly less than your income. I am at a loss as to why this simple point is not understood.

chattychappy

newship wrote: »

You 'seriously wonder how they cope' It's very simple, each month spend slightly less than your income.

Er... that's what most people who have credit cards do.

But, credit cards offer:

1. Flexibility - you can make a large purchase without having to transfer funds into your current account/draw cash first. Meanwhile your funds can be kept in a savings account.
2. S75 protection (subject to provisos).
3. A cheap way of drawing cash overseas.
4. A way of spreading a large purchase over a few months (and with a 0% card paying no interest for the privilege).
5. Something to show when you hire a car or check into a hotel.
6. Better regulatory protection than debit cards.
7. Cash backs/airmile/nectar type promos.
8. Easy to have multiple ccs (unlike debit cards where you need a current account for each), useful in the case of blocks, especially when abroad.
9. Building a credit history should you wish to apply for a mortgage later on.
10. And, of course, a useful form of borrowing if you need it.

I can cope without them in the same way I can cope without my mobile phone. Not very well.

newship wrote: »

I am at a loss as to why this simple point is not understood.

Hopefully you can understand the simple points above.