Money Transfer to pay mortgage

Alienfish3000ad

hi peeps,

Just come across the idea of money transfer cards.

Has anyone used one to pay off a bit of their mortgage at the beginning of the period, and then saved the money you otherwise would've spent on the mortgage? and then at the end of the money transfer card term, used the amount saved to pay off the money transfer card.

As far as I can see, the benefits would be reduced total mortgage interest for the period and also earned interest in the bank.

e.g.
1. £100k mortgage @ 2% interest rate = £2k interest pa
monthly mortgage payments = £833

2. money transfer £10k, pay at 1 Jan. Thereby saving £2k interest accruing for the year.
3. monthly mortgage payments = 0. The £833 you now save in a bank account @ 4% interest. Over 12 months, you save (£833 x 12) £10k. Interest earned = £400
4. At 31 Dec use the £10k saved to pay off the money transfer card.
5. Total benefit = £2k interest saved on mortgage + £400 interest earned in the bank

Is this too simplistic or am I missing something?

YorkshireBoy

Alienfish3000ad wrote: »

hi peeps,

Just come across the idea of money transfer cards.

Has anyone used one to pay off a bit of their mortgage at the beginning of the period, and then saved the money you otherwise would've spent on the mortgage? and then at the end of the money transfer card term, used the amount saved to pay off the money transfer card.

As far as I can see, the benefits would be reduced total mortgage interest for the period and also earned interest in the bank.

e.g.
1. £100k mortgage @ 2% interest rate = £2k interest pa
monthly mortgage payments = £833

2. money transfer £10k, pay at 1 Jan. Thereby saving £2k interest accruing for the year.
3. monthly mortgage payments = 0. The £833 you now save in a bank account @ 4% interest. Over 12 months, you save (£833 x 12) £10k. Interest earned = £400
4. At 31 Dec use the £10k saved to pay off the money transfer card.
5. Total benefit = £2k interest saved on mortgage + £400 interest earned in the bank

Is this too simplistic or am I missing something?

Several things...

1. The mortgage company would still want a monthly payment.
2. There will be a fee for the money transfer. Typically 3-4%.
3. You seem to be double counting the benefit.
4. Etc
5. Etc

Dime_Bar

Your maths and practicalities are both wrong.

1- your would only be saving interest on the 10000 not the full 100000 that benefit would reduce each month.

2- You would only gain interest on the amount you have in the bank at the time, month one that would only be £833 etc

3- where you going to get 4% from for a easy access no risk account.

Alienfish3000ad

@Yorkshire boy

3. I don't understand, how am I double counting?

Lumiona

Best of luck finding a 4% interest account to save and the mortgage lender will continue to take payments, they'll just reduce the monthly sum taking your overpayment into account.

Alienfish3000ad

Dime_Bar wrote: »

Your maths and practicalities are both wrong.

1- your would only be saving interest on the 10000 not the full 100000 that benefit would reduce each month.

2- You would only gain interest on the amount you have in the bank at the time, month one that would only be £833 etc

3- where you going to get 4% from for a easy access no risk account.

1. thought so, seemed to high a number to be saving.
2. yes, I simplified for arguments sake
3. I made that up for illustration purposes :rotfl:

BoGoF

Alienfish3000ad wrote: »

@Yorkshire boy

3. I don't understand, how am I double counting?

The question should be how are you counting. So much wrong with your figures.

Alienfish3000ad

BoGoF wrote: »

The question should be how are you counting. So much wrong with your figures.

What do you mean? Could you correct me please?

boo_star

Alienfish3000ad wrote: »

What do you mean? Could you correct me please?

You'll be paying roughly 3-4% of the balance transfer as a fee.

That dwarfs the interest rate on most residential mortgages, quite considerably.

Nebulous2

Alienfish3000ad wrote: »

What do you mean? Could you correct me please?

What's 2% of £10000? (Hint it isn't £2000) and again as someone has said it it is only 2% saved at the beginning of the year.

You're not the first and you won't be the last to come up with a money making plan which is just too good to be true. I may have thought of a few myself!

BoGoF

Alienfish3000ad wrote: »

What do you mean? Could you correct me please?

Ok, I'll humour you. Two obvious points.

Why on earth would your mortgage payments be £0 if you made a £10,000 overpayment?

Interest earned on £833 saved a month at 4% = £215 over 12 months. This ignores the fact you don't have £833 per month to save and you won't be getting 4%. Add on a £300 balance transfer fee and it's obvious you have missed a lot.