borrow from c/c to pay mortgage ?

alanco15

hi, i am a new mfw, i have recently opened a oneaccount, i have a bit of savings and leave extra in account each month so all going well so far,

but i was wondering , i keep being offered cash advances from my c/c's offering 0% for 3 or 6 months, obviously with a charge i think it is 3% of advance,

is it worth while borrowing this money putting it in the oneaccount for the duration of the 0% rate then paying it back.
I have a £62,000 mortgage , current rate of 6.60%
i could borrow £5.000 on c/c with a charge of 3% ( £150 i think if my maths serve me well) ,

what would i save if any on interset payments on mortgage, i'm not sure how to work it out, anyone ever done it, any advice please thanks.

siber

Here's my attempt at a back-of-an-envelope calculation, with attached conditions, assumptions and known inaccuracies for simplicity's sake. Please also note the disclaimer at the bottom of the post.

ASSUMPTIONS: Mortgage rate does not change. Interest is charged annually. Card interest free period is 1 year (I know this is inaccurate, but bear with it!) No minimum card repayments required over interest free period.

Annual interest on mortgage of £62,000 (Option 1, without card assist)
(62000 x 1.066) - 62000 = £4092

Annual interest on mortgage offset by £5000 from card. (Option 2)
[(62000 - 5000) x 1.066] - (62000-5000) = £3762

Difference between Option 2 and Option 1:
4092 - 3762 = £330 over the year.

Cost for £5000 credit facility: (5000 x 1.03) - 5000 = £150

Total savings for Option 2 = 330 - 150 = £180 for the year.

---

Realising now that you'll only be taking the credit option over 6 months, the potential savings on the mortgage will be halved (or less due to monthly compounded interest, rather than annual interest charge on the mortgage - note that I will continue calculations optimistically disregarding compounding interest) yet the fee for arranging the credit facility remains the same - £150 - regardless of the period you can keep the £5k interest free.

Therefore, taking option 2 over 6 months and then reverting back to a £62,000 mortgage for 6 months, would save:
(330 / 2) [optimistic] - 150 = £15 [optimistically] over the year

Marginal savings... Personally, I'd go without the £15 for the assurance that I wouldn't forget about the card and then get charged a crazy interest rate on £5000 once the interest-free period expires...

Savings from Option 2 over 3 months and then £62k mortgage for 9 months:
(330/4) [v.optimistic!] - 150 = -£67.50 [v.optimistically!]

THIS WOULD ACTUALLY COST YOU MORE!!! This whole problem all stems from the confusion between (time dependant) interest rates and the (fixed) percentage arrangement fee for the card.

Personally, I wouldn't use the credit card at all. I'd stick with the mortgage as it's simpler and there's nothing to forget causing a huge credit-card bill.

DISCLAIMER: I have no background in finance - I'm just trying to help out with illustrative maths. Nothing I have said should be taken a substitute for professional financial advice.

Jonbvn

OP,

There is a whole board dedicated to borrowing money from c/c's - it called stoozing.

Here's the link:
http://forums.moneysavingexpert.com/forumdisplay.html?f=95

TBH, it hardly seems woth borrowing 5k only. If you tried you can borrow much more.

BTW, there is a famous stoozer on MSE who managed to pay off his mortgage completely doing this, since in essence it was at 0% interest.

Freebie_Manor

Hi we've had our one account for almost 5 years now and its brilliant - we're not quite mortgage free yet but well on the way. The visa card one account give you is the card youhould use to transfer balances too, and it shows in your account within a week, check out the stoozing calculators and the 0% on all purchases offers on credit cards. Remember the interest you've saved is money you are not paying interest on and gives cumulative benefit.

alanco15

thanks everyone for your input, siber it looks from your rough calculations that it is probably not worth it for 5k,

but i am interseted in your idea freebiemanor regarding the oneaccount visa card, but still a little confused as to what i would have to do,
would i transfer an amount from my oneaccount visa to a 0% c/c, thus saving on the oneaccount interest. (how would i go about it)

or do i just transfer in a larger than 5k amount from a 0%c/c into the oneaccount.

i am really interseted in doing something like this but not sure where to start,

i have a good credit rating so borrowing shouldn't be a problem, and am willing to spend some time organising and managing , still tring to get my head round the whole stoozing thing .
thanks again anymore advice or other ideas would be greatly appreciated, really can't wait to be mortgage free.!!!!!

monkeymutz

If you go to the MSE affliated stoozing website - www. stoozing.com then you will get list of best offset mortgages, loads of information and a lot of support who are using this method. I am thinking of stoozing to an offset mortgage but not really sure of what to do myself so if you post a item on it in the forum then I would certainly read it with interest. I am just trying to get my head around basic stoozing for now
MM

alanco15

cheers monkeymutz, i have just been reading about snoozing on the mse site,
it is starting to click a little bit, looks like i might need to apply for an egg card to act as a go between from the c/c to the oneaccount ,

anyone else tried this ?

monkeymutz

Make sure you apply for an egg money card as a mule and not the egg card. Can help you much beyond that on the offset mortage - go to the stoozing website forum and they will be able to help and advise you much better than i can as I am just a newbie at this and it is quite an art!

MM

andyboyo

alanco15 wrote: »

cheers monkeymutz, i have just been reading about snoozing on the mse site,
it is starting to click a little bit, looks like i might need to apply for an egg card to act as a go between from the c/c to the oneaccount ,

anyone else tried this ?

As has already been mentioned you can use the OneAccount visa card to achieve this, you dont really need to use the Egg option.

YorkshireBoy

alanco15 wrote: »

...anymore advice or other ideas would be greatly appreciated...

There's a wealth of information on the official stoozing website.

You may find the 'stoozulator' particularly useful in determining whether a deal is worth taking up...

http://www.stoozing.com/calc.htm

alanco15

thanks for all your suggestions, very interseting, i will read stoozing forum and try to see how i could apply it to my mission to be mortgage free.

will keep you posted how it;s going

any other ideas , how i could get it down?
i guess little things like not paying bills until the last minute, so to leave money in my account for longer might help a bit.