0% credit cards to help with mortgage

zalek

Hi there,

I have just found out this forum and as anyone else have thought 'what a fantastic place'. So spent the last hour reading as much and as quickly as I could. Found few interesting ideas and kind of confirmation that not only me thinks about mortgage as a credit rather than something that is just paid by direct debit from your account for the next 32 years.

Anyway, wanted to ask if it's worth doing all this.
Having just bought a house few months ago we have a repayment mortgage of 146,434 (95% LTV, 5.79% for the next two years). Decided to take the longest available option (32 years and 8 months) to make minimum payments as small as possible (826 at the moment), in case something happens and every penny that is left in our pocket at that time counts.

We can afford to overpay the mortgage by 500 a month, which reduces the term from 32 to 19 years or so. I guess we could pay more but don't really want to change our lifestyle. However, I started to look for ways to reduce the term of mortgage even more (without having to sacrifice anything). So I came up with an idea.

The idea is that we are going to be using 0% credit cards. We will build up our credit limits as high as possible. Than, when it comes the time to remortgage, we would get the best possible one that offers offsetting facility. And would keep the money off our 0% credit cards to offset mortgage. Hopefully anything around 20k and growing all the time. No risk if something goes wrong as the money could be withdrawn to pay off the card - we stear clear of financing our life with credits (apart from the mortgage, obviously).

Now, is it worth all the hassle? It takes a lot of work to shifts the card. Are there any drawbacks that are yet have not spotted in my plan? Is anyone doing just that at the moment? Any comments would be appreciated

thanks
slawek

Happy_frank

Go for the credit card stoozing certainly (make sure your organised with paying the minimums on time), but an offset morgage will probably be quite expensive for you.
Offset mortgages tend to have a higher interest rate than other mortgages and only really workout benifical if you have a high percentage of saving to offset against the mortgage (50% plus of the amount borrowed).
Otherwise you are probably better sticking your stooze pot in a high interest account then you will still have the money to pay off the cards should you be unable to balance transfer and you can then use any interest earned towards the mortgage.

zalek

Happy_frank wrote: »

Offset mortgages tend to have a higher interest rate than other mortgages

Would the same be true about any kind of mortgage that allows you to reduce the amount owed by any kind/type/version of offsetting solution? That would be kind of a bad news as I thought I found a way to reduce the term by another 3-4 years.

maninthestreet

Are you saying that you intend to use the cash advance feature of the credit cards in order to fund a cash lump sum to use as an offset for the mortgage?

zalek

Yes, that's the idea. And if the many is accesible without notice, I can pay back any all of the cards at any time should I need to. In this way you can use fast stoozing (like Virgin card with 2.98% direct transfer of available limit to your bank account) as well as slow one with cards where you have 0% on purchases.

However, if there is a certain break point because offset mortgages have higher interest rate than normal ones, I guess for some years to come I'll be better off putting by that money into savings. Not a big deal as I guess I'll not only be making money but building up my and my partners credit limits. So hopefully combine together it'll be tens of thousands of pounds :j

webbo100

I don't agree with the blanket statement that you need 50% of the mortgage as offset, this ignores each persons individual circumstances.
Offsetting is by far the best idea for high rate tax payers.
I already do what you are looking to do and I think you will find a lot of stoozers use offset.
I have a offset mortgage 6.5% garanteed to always be 1% above base rate.
I stooze a pot of cash with balance transfers also have a halifax one card 15 months 0% on purchases so pay as much as possible with that and keep the money in the stooze pot. presently looking at saving £1,200 in interest a year but planning to try and increase the pot early next year.

cm233lh

Happy_frank wrote: »

Offset mortgages tend to have a higher interest rate than other mortgages and only really workout benifical if you have a high percentage of saving to offset against the mortgage (50% plus of the amount borrowed).

A blanket statement that is not necessarily true. People like The One (formerly Virgin One), and First Direct, CG etc. put you on a variable rate with no options. But some of the smaller building socs - e.g. Hinkley and Rugby - offer some very competitive trackers with offset facilities as an optional extra at no extra cost. I've just gone over to a life tracker on IF at BOE + 0.34% (but that deal's not availalbe any more). Shop around and find the best deal.

Savings accounts are pretty hight compared with tracker mortgages right now, so offset won't necessarily make sense, but it won't always be that way. Remember, if you get interest, you'll pay tax on it. If you offset, you won't.

zalek

Yes, I think you are right guys saying that it's down to individual cases. Though I'm not worried about it now as it's still a long way for my fixed rate to expire.

I think there are two points here. Firstly, as you both said guys you need to browse around and do your calculations that takes into account various options. I think that's important as even small mistake in calculations might cost you hundreds of pounds when you have 100.000 or more morgage left.

Second think is to be aware of one thing - stoozing pot it's not yours and might not be there all the time. So, if you are forced to pay back part or all of your stooz pot, you might end up actually paying more. Though, this is not going to stop me.