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Getting a loan / credit card to overpay on mortgage?

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Getting a loan / credit card to overpay on mortgage?

edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
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mcc86mcc86 Forumite
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edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
Hello,

I'm in my first year of paying my mortgage, therefore as you can imagine the maximum amount I can overpay (10%) is far greater than I could ever dream of. I could however afford to pay that over a 3 year period.... which got my thinking..... is there sense in getting a loan to overpay by 10%?

A colleague of mine has just got a loan for £9,000 and they have simply have a direct debit for the next 3 years and are paying back a total of £9,450. By overpaying £9,000 on your mortgage in the first year, you would be saving much more than £450 on your mortgage.

Or alternatively, get a credit card that is interest free for 2 years (they do exists from time to time).

Obviously this does only work if you can afford to pay back both your mortgage, and the loan. Based on the MSE mortgage overpayment calculator, it seems to indicate that by paying a £9000 lump sum in Year 1 (of a 25 yr mortage, you would save £5,000 in interest alone.

Am I missing a trick? Surely I am, otherwise many other people would be doing this.

Replies

  • A_Frayed_KnotA_Frayed_Knot Forumite
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    I thought the very same when I started o/p the mortgage. Seems simple . . . But, there's always a But . .
    You would need to make sure an overpayment to your mortgage counts in the credit card kingdom. I know you can pay bills/food/clothes etc etc, but to take out/pay mortgage might mean they class that as taking cash, which would mean for some c/c's a No, No because would then charge interest big time.

    I really don't know enough about c/c's etc, but do know there is a card(?) that can do cash transfers, without any or very little fee. Check it out.

    Seems a good idea but when I asked about it, I didn't get many replies. So all I can say to you is - Do your homework, it may be possible.

    Good Luck and let us know how you get on.
    Always have 00.00 at the end of your mortgage and one day it will all be 0's :dance:
    MF[STRIKE] March 2030[/STRIKE] Yes that does say 2030 :eek: Mortgage Free 21.12.18 _party_
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  • greentgreent Forumite
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    We have an IO mtge for a BTL property which has just over 4 years to run. We are unlikely to fully repay it by that time, as we have other (more fun! :D) plans for some of our money. Rough calculations show a remaining balance of between 20-25K at expiry. One option we are considering is getting a cheap personal loan at that time to repay the mtge (would be cheaper to do so now than re-mtge if we were in that position now) over 3-5 years (depending) Have also considered 0% CC for some of it - but I personally would spend on the 0% CC for several months and transfer equivalent amounts as and when spent to the mtge as OPs, rather than have a cash advance.

    It's an option to consider - you need to weigh up whether you'll be disciplined enough to repay CC in 0% period/ can afford all monthly repayments :)
    I am the master of my fate; I am the captain of my soul
    Repaid mtge early (orig 11/25) 01/09 £124616 01/11 £89873 01/13 £52546 01/15 £12133 07/15 £NIL
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  • VDOT47VDOT47 Forumite
    277 posts
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    mcc86 - having done just this earlier this year ie. borrowed c£11,000 on a money transfer credit card at 0% for 2.5 years (admittedly with a small fee at the outset, about £250/300 I think), I would advise:


    1) It can be done, and you are correct that it will save you a lot of interest over the period of the mortgage, but


    2) You have to be able to make the monthly repayments (about £100 pcm on my card) and accept that this will eat into your spare pot of money each month, thus reducing monthly overpayments;


    3) You will need to either save up a lump sum to pay off the card at the end of the promotional period, or accept that you will pay a further fee to balance transfer it for another couple of years; and


    4) If you look to re-mortgage or move while the CC balance still sits there it will impact upon the amount you will be able to borrow and the deals that you can obtain.


    It is definitely worth checking out as an option though.


    The 0% spending CC option that greent mentions above is also a good one (subject to the same comments above).
    Original Mortgage (Feb '17) £269,995
    Current Mortgage (End 11/19) £226,790
    End Date November 2039 Original End Date February 2042
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