Using Credit Card to pay off chunk of mortgage

bris

Why don't you just make overpayments to the mortgage, I would be surprised if your doesn't allow this. It can take years off the mortgage and no need to shop about in 2 years when the card needs interest paying.

Boyder1974

So I took £10k on Cash transfer - the CC charged me £290 for the privilege so this needs to be taken into account. Now I worked it that over the repayment term of the 0% interest period compared to the interest on my mortgage I'll only save about £60 (When taking into account the £290 fee). With me so far..


I have a mortgage that allows unlimited overpayments (Great product from HSBC) without any penalty. So I could just make overpayments into it that way but it wont have the same saving - you'll save but not as much. I also keep my repayments the same as to reduce my term and not the monthly premium (Although the interest drops a little but the capital doesn't)


Ok but when I worked out that £10k overpayment on the remaining 16/17 years left on mortgage it saves me in excess of £3k in interest - worth saving.


Some things as previously mentioned.

• Must pay minimum back each month (in my case 1% of balance)
• Must clear the card by end of 0% term or face prevailing rates (obviously there are 0% transfer cards out there so you could just transfer the balance of the money transfer card to one of those a month or so before end of term)

Good luck with whatever you do but make sure you are disciplined and have the right check and balances in place.


Its nice to see the mortgage balance go down (Although you have another balance with your credit card.


I think this works and will continue to do this every couple of years as the savings on the interest is worth it.

stoopyftm

bris wrote: »

Why don't you just make overpayments to the mortgage, I would be surprised if your doesn't allow this. It can take years off the mortgage and no need to shop about in 2 years when the card needs interest paying.

I'm about to switch mortgages and can get a better deal with a lower LTV. Im not looking to reduce the term at this point, but rather cut the monthly payments


Also I'm pretty much 100% certain that I've got the discipline to pay off a card, and if I have anything left over then I can use another 0% balance transfer to clear it. Im not sure I will have same discipline to use 'spare' cash to overpay the mortgage.

flower77g

I've been doing this too - some of my mortgage was on an old fixed rate of 3.89% with a really high redemption charge but the right to overpay by 10% per annum.

I used a Virgin Money money transfer card when their money transfer fee was about 1.7%. I was lucky in that Virgin gave me a really high limit.

Pitfalls:

- the monthly credit card payment at 1% is higher than the monthly mortgage payment so it worsens cashflow (but pays the original mortgage debt off faster)
- the building society where I had a mortgage wasn't happy to re-advance the money paid off by the card at the end of 3.89% fixed rate mortgage period. Remedy was to remortgageg to another lender - which was probably a good idea anyway - but I did get asked all sorts of questions about why I had such a high credit card balance (!).

fanheater

Boyder1974 wrote: »

So I took £10k on Cash transfer - the CC charged me £290 for the privilege so this needs to be taken into account. Now I worked it that over the repayment term of the 0% interest period compared to the interest on my mortgage I'll only save about £60 (When taking into account the £290 fee). With me so far..


I have a mortgage that allows unlimited overpayments (Great product from HSBC) without any penalty. So I could just make overpayments into it that way but it wont have the same saving - you'll save but not as much. I also keep my repayments the same as to reduce my term and not the monthly premium (Although the interest drops a little but the capital doesn't)


Ok but when I worked out that £10k overpayment on the remaining 16/17 years left on mortgage it saves me in excess of £3k in interest - worth saving.

This is still good practice but slightly ambiguous the way you wrote it. To be clear, assuming that you would've paid the same 10k off the mortgage balance over the same period you pay the credit card back, which I guess is a year or two, you would still save most of that 3k in interest.

Teha

I am using a 0% balance transfer to pay off my mortgage.

This is how I have done it:
* I calculated my cash flow per month which is around $1500 (left over $ after paying all my bills)
* got promotional 0% transfer credit card (1% transfer fee). 12 months term.
*Transfered $18,000.00 (1500*12) from my credit card to my line of credit. The line of credit is with the same bank were I have my mortgage (line of credit and credit card are with different institutions)
*Paid a 1 time lump sum payment to the mortgage - avoiding thousands in compounding interest on the 18K
* Now I am using my $1500 monthly cash flow to pay off my credit card

In 12 months I will repeat the same move. If I can only get a 6 month balance transfer I will only get 9K. The trick is to make sure you are disciplined enough to make the monthly payments that will bring ur balance down to 0 at the end of the balance transfer period. By my calculations my 25 year mortgage will be cut down by more than half with this strategy.

One thing, your mortgage needs to have prepayment privileges in order for this to work. My mortgage allows 15% prepayment per calendar year. Anything above that would be subject to prepayment fines.

agrinnall

Teha wrote: »

I am using a 0% balance transfer to pay off my mortgage.

While the principal may be similar, and your post may be of use to our US readers, what you can do with US cards and mortgages is likely to have very little application in the UK.