Credit card stoozing to pay mortgage

danfearn77

Hi All

I have just got a credit card with a £12k limit. I have a mortgage of £520 a month but i currently overpay an additional £300 on top, so £820. I was just looking at my credit card and it is 0% on money transfers for 12 months, just a 3% initial fee. My thinking is this...Transfer say £5000 to my account (£150 fee) then pay the £5000 off my mortgage whilst still overpaying as before, and slowly pay the credit card down over the 12 months. Surely taking 5K off the mortgage should lower interest as it is calculated daily? What are everyones thoughts on this? Ive just received a promotion at work so we want to use this opportunity to build up equity. thanks

kuratowski

What's the interest rate on the mortgage? If it is less than 3%, then your idea will make you worse off.

danfearn77

kuratowski wrote: »

What's the interest rate on the mortgage? If it is less than 3%, then your idea will make you worse off.

I want to say its around 2.4% ish. So would this not be beneficial then? I just assumed that by paying a bulk off it would save me some £££ but if it doesnt i'll leave it!

kuratowski

It amounts to paying a £150 fee to save £120 interest (£5000 x 2.4% = £120). So it would cost you money, not save it.

danfearn77

kuratowski wrote: »

It amounts to paying a £150 fee to save £120 interest (£5000 x 2.4% = £120). So it would cost you money, not save it.

So is it best i just up the overpayments instead?

MovingForwards

Yes, have you had a play around with mortgage overpayment calculators?

kuratowski

danfearn77 wrote: »

So is it best i just up the overpayments instead?

Yes, or have you considered using your pay rise to increase contributions to your pension, which has tax advantages? It's also possible to do a bit of both - you don't have to put all your eggs in one basket.

smokybacon88

Surely the interest on a mortgage and credit card are calculated differently? I believe the OP would be better off overpaying the 5k as that could save you 000s in interest and beat the £150.