Using balance transfer to reduce mortgage

Benbow91

I am looking to purchase a property and have come up with an idea which I would like a second opinion on,

I was thinking instead of getting a mortgage of say £130,000 get one for £110,000 and get £20,000 on two credit cards £10,000 on each and then transfer the balance to two new credit cards with 0% balance transfers which would affectivly be borrowing me £20,000 interest free and would reduce the overall interest paid over the life time of the mortgage?

Some educated views would be much appreciated.

Thanks in advance.

[Deleted User]

You're hoping for some fairly high limits, which you may or may not get. And you certainly wouldn't want to apply for them while going through a mortgage application.

You'd then need a plan to get them cleared within the promo period in the event you couldn't transfer them again.

If you can transfer them, remember to factor in any fees, including the cash fees for getting the cash from the cards in the first place.

ThePants999

The lender's solicitor will want to know where the deposit is coming from.

If part of the answer is "credit cards" you're going to get a big, fat "NOPE".

However, if you can get the £130,000 mortgage, then find a way to get £20,000 in cash at 0% interest and repay some of the mortgage, go for it.

KL0001

Most cards have a balance transfer fee, usually around 3% from my experience, I!!!8217;d have though this was higher than a mortgage. Not to mention you!!!8217;d either need to repay the balance in full during the promo period, so £20k in around 18 months (depending on the length of the promo period) or do another balance transfer, hoping that there is 0% promo close enough to when yours comes to an end, plus pay a further balance transfer fee?

Personally you!!!8217;d be better of getting a mortgage for the full £130k and looking to make over payments (usually limited to 10% per year) instead of trying to pay off the balance of a couple of credit cards.

Benbow91

Thanks for the reply guys it’s been really helpful !!!128077;

steampowered

Yes, this is pretty much exactly what I do.

I have about £50k of credit card debt on which I am paying 0% for 2-3 years or so. That money is invested in a portfolio of shares on which I earn a decent return. The only cost to me is the cash transfer or balance transfer fees. On the specific cards I've chosen the promotional rate was 1% or 1.5%.

At the end of the 0% periods, I will do a balance transfer back onto other 0% cards if 0% deals are available. Otherwise, I will pay off the debt at that time.

However, I think you need to be careful doing this with property especially as you are borrowing yet more on top of the credit cards:
- A mortgage lender will not lend based on a borrowed deposit. They want to see cash savings.

- You are terribly exposed. This is leverage on top of leverage. If there are void periods or any drop in house prices you'll immediately be in negative equity.

- Your credit cards will only be at 0% for the promotional period of 2-3 years or so. After that, you will need to refinance. Refinancing is easy with shares but difficult with property as selling property takes a long time to sell and involves significant costs.

G_M

Back in the good old days I bought a house for £70K odd entirely on 0% credit cards.


That gave me plenty of time to do the place up, get a tenant in, and then once the rent started flowing I applied for a mortgage to pay off the cards.

thelem

Even if you are able to get £20k at 0%, there's no guarantee you'll be able to get the same amount when the promo rate expires. Make sure you have a backup plan if that happens.

ThePants999

G_M wrote: »

Back in the good old days I bought a house for £70K odd entirely on 0% credit cards.

This gave me a great mental image of you in an EA's office saying "I'd like to split the bill, please. £5K on this card... £10K on this one..."

sal_III

You are working under the assumption, that you will keep getting accepted for 0% balance transfer CCs with total £20k limit AFTER you have taken a mortgage. What if that is not the case and you have to pay the 20k after the promotional term is over?

AdrianC

Basically, you're wanting to stooze your mortgage. Lenders got wise to that years ago.