Should I use credit card to pay off mortgage?

retireetobe

Please could anyone more knowledgeable offer some input. I'm 64, husband is 66. We have a Nationwide mortgage with a remaining debt of £16200 and five and a half years to run. In reality, we will pay it off in Feb 25 when I retire, from my works pension lump sum. It's not on any fix, and the rate is increasing to 6.5%. We pay £330 per month (overpayment of only about £30 per month now, and we could only afford to increase this slightly without impacting our lifestyle) and no penalty for early repayment.

I have a credit card offer meaning I could money transfer to my bank the full £16200 for a 3.5% fee (so £567) for 18 months and just pay off the mortgage now. I've no idea what the actual saving would be, but I'm guessing quite a lot. It seems like a no-brainer, but I can't help wondering if I'm over (or under!) thinking it? Partly because my husband leases an expensive car (his passion, so I don't complain and we can afford it) and the current deal expires this December. Will our 'new' borrowing of £16200 mean he won't be accepted for a new lease deal? Or will the fact that we no longer have a mortgage offset that? He'd be really upset if he can't get another fancy car. And also why do I actually feel nervous at being without a mortgage (but with the same debt) after all these years?!

Thanks in advance for any input.

Exodi

I mean assuming you can pay the credit card off in 18 months (which I'd assume is the 0% promotional period), then it really is as simple as 3.5% < 6.5%.

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

DullGreyGuy

Exodi said:

I mean assuming you can pay the credit card off in 18 months (which I'd assume is the 0% promotional period), then it really is as simple as 3.5% < 6.5%.

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

But they are paying it off in under 12 months so it wont be the full 6.5% plus overpaying in the interim will also reduce the interest paid per month.

The concern with the credit card plan will be what if plans change and you have to defer your retirement a few years? The standard interest rate on the remaining credit card balance would quickly outweigh the benefits achieved. 

retireetobe

Exodi said:

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

Just checked - 5.49% for a 2 yr tracker, 5.64 for a 2 yr fixed, so not great
And yes, 18 months is the promotional period for the credit card offer (money transfer for 18 months for a one-off 3.5% fee)

Exodi

DullGreyGuy said:

Exodi said:

I mean assuming you can pay the credit card off in 18 months (which I'd assume is the 0% promotional period), then it really is as simple as 3.5% < 6.5%.

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

But they are paying it off in under 12 months so it wont be the full 6.5% plus overpaying in the interim will also reduce the interest paid per month.

The concern with the credit card plan will be what if plans change and you have to defer your retirement a few years? The standard interest rate on the remaining credit card balance would quickly outweigh the benefits achieved. 

Sorry, where were they planning to pay it off in under 12 months without a credit card? I thought the current plan was "we will pay it off in Feb 25 when I retire, from my works pension lump sum". If they can pay it off straight away without paying a money transfer fee, then obviously that's the best option. The point about overpayments is a red herring, because they would save interest by making overpayments regardless of whether it was on a mortgage or a credit card.

And as I said "assuming you can pay the credit card off in 18 months" as it goes without saying if they can't, for whatever reason, as you say, it is clearly nowhere near as attractive (e.g. moving debt to double digit interest rates).

retireetobe

OP here. To clarify, Exodi's understanding is correct. There's no way we can just pay off the mortgage now without the credit card deal. And if we do opt for the credit card deal, we will be obviously reducing the debt over the 18 months offer period through the monthly repayments - only obliged to pay 1% of the outstanding balance each month, but would actually pay at least £330 (because we're used to managing that) and more whenever we can. This would mean we have approx £10800 owing at the end of the 18 months, to be repaid in full by my pension lump sum.
If can't imagine why I won't be able to retire in Feb 25, but if any disaster strikes and I can't, I suppose I'd just have to hope that more decent credit card deals are around. That's sounds high-risk, but I've had multiple offers all my life. Never been 66 before though, so maybe they dry up with age.....

DullGreyGuy

Exodi said:

DullGreyGuy said:

Exodi said:

I mean assuming you can pay the credit card off in 18 months (which I'd assume is the 0% promotional period), then it really is as simple as 3.5% < 6.5%.

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

But they are paying it off in under 12 months so it wont be the full 6.5% plus overpaying in the interim will also reduce the interest paid per month.

The concern with the credit card plan will be what if plans change and you have to defer your retirement a few years? The standard interest rate on the remaining credit card balance would quickly outweigh the benefits achieved. 

Sorry, where were they planning to pay it off in under 12 months without a credit card? I thought the current plan was "we will pay it off in Feb 25 when I retire, from my works pension lump sum". 

My bad, I've been dealing with a matter to be delivered on 1/1/2026 and keep thinking we are in 2024 

Exodi

DullGreyGuy said:

Exodi said:

DullGreyGuy said:

Exodi said:

I mean assuming you can pay the credit card off in 18 months (which I'd assume is the 0% promotional period), then it really is as simple as 3.5% < 6.5%.

That said, falling onto the SMR is not a fair comparison, what would the rate be for a 2Y fix or tracker? Appreciate it's likely to be over 3.5%.

But they are paying it off in under 12 months so it wont be the full 6.5% plus overpaying in the interim will also reduce the interest paid per month.

The concern with the credit card plan will be what if plans change and you have to defer your retirement a few years? The standard interest rate on the remaining credit card balance would quickly outweigh the benefits achieved. 

Sorry, where were they planning to pay it off in under 12 months without a credit card? I thought the current plan was "we will pay it off in Feb 25 when I retire, from my works pension lump sum". 

My bad, I've been dealing with a matter to be delivered on 1/1/2026 and keep thinking we are in 2024 

Must be my local Evri driver.

MFWannabe

retireetobe said:

Please could anyone more knowledgeable offer some input. I'm 64, husband is 66. We have a Nationwide mortgage with a remaining debt of £16200 and five and a half years to run. In reality, we will pay it off in Feb 25 when I retire, from my works pension lump sum. It's not on any fix, and the rate is increasing to 6.5%. We pay £330 per month (overpayment of only about £30 per month now, and we could only afford to increase this slightly without impacting our lifestyle) and no penalty for early repayment.

I have a credit card offer meaning I could money transfer to my bank the full £16200 for a 3.5% fee (so £567) for 18 months and just pay off the mortgage now. I've no idea what the actual saving would be, but I'm guessing quite a lot. It seems like a no-brainer, but I can't help wondering if I'm over (or under!) thinking it? Partly because my husband leases an expensive car (his passion, so I don't complain and we can afford it) and the current deal expires this December. Will our 'new' borrowing of £16200 mean he won't be accepted for a new lease deal? Or will the fact that we no longer have a mortgage offset that? He'd be really upset if he can't get another fancy car. And also why do I actually feel nervous at being without a mortgage (but with the same debt) after all these years?!

Thanks in advance for any input.

Personally I’d do without the fancy car until mortgage is paid off; using this money to pay it off as quickly as possible 
nothing is more important than your home 

TheAble

Taken purely in isolation it's not a bad proposition. One thing to bear in mind though is that you may be placing restrictions on your retirement/pension options i.e. you may be dependent on taking the lump sum rather than staying invested. Not that you'd necessarily want to stay invested but it's always a plus to have the option.

retireetobe

MFWannabe said:Personally I’d do without the fancy car until mortgage is paid off; using this money to pay it off as quickly as possible 

nothing is more important than your home 

Agreed. In fact I'd do without a fancy car forever, they're of no interest to me. But he's pretty excellent in every other way, and it's his only expensive habit. If ever the home was at risk he'd return the car without question (it'd be a nightmare to sleep in!) but we're a long way from that. I only even mentioned the car in case converting mortgage to credit card debt might screw up his chance of a new car lease. I completely take your point though