Pay mortgage using a 0% credit card

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sultanoflondon
sultanoflondon Posts: 72 Forumite
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in Stoozing: free cash from credit cards
Hi all,

I was wondering whether there is a smart way to pay your mortgage using a 0% credit card? I know the method of using an offset mortgage, but are there any general ways of doing this, for any 'generic' British mortgage?

Thank you!
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  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    Most 'generic' mortgage lenders won't accept card payments unless in arrears.
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
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    Use a 0% purchases card for all your normal monthly spend.
    Pay the 1% minimum monthly payment.
    Pay the other 99% off the mortgage.
    When the card is getting towards full, BT the debt fee-free to a 0% BT card.
    Rinse and repeat.

    Not without risks though. 3 or 4 immediately spring to mind.
  • sultanoflondon
    sultanoflondon Posts: 72 Forumite
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    YorkshireBoy wrote: »
    Use a 0% purchases card for all your normal monthly spend.
    Pay the 1% minimum monthly payment.
    Pay the other 99% off the mortgage.
    When the card is getting towards full, BT the debt fee-free to a 0% BT card.
    Rinse and repeat.

    Not without risks though. 3 or 4 immediately spring to mind.

    Thanks for this! Would appreciate any light on the risks...
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
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    sultanoflondon wrote: »
    Thanks for this! Would appreciate any light on the risks...
    No point duplicating any you've already identified when coming up with your plan. Start me off with a couple and I'll try and fill in the gaps.
  • sultanoflondon
    sultanoflondon Posts: 72 Forumite
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    YorkshireBoy wrote: »
    No point duplicating any you've already identified when coming up with your plan. Start me off with a couple and I'll try and fill in the gaps.

    What I was thinking was if I need to pay the total oustanding credit card bills (for example on demand, or I fail to get a 0% balance transfer card), then I will be in trouble, because I won't have that cash in my account to make the payments.

    Any other issues?
  • hugheskevi
    hugheskevi Posts: 3,854 Forumite
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    What I was thinking was if I need to pay the total oustanding credit card bills (for example on demand, or I fail to get a 0% balance transfer card), then I will be in trouble, because I won't have that cash in my account to make the payments.
    I manage this in two ways. First, I project income and expenditure and ensure I can always pay minimum payments and full balance at end of offer without relying on securing new offers. As new offers are secured, money is freed up for other uses.

    Second, I invest in ISAs in addition to repaying mortgage. That provides a capital sum that can be drawn upon if necessary, although it is intended as a long-term investment.
    Any other issues?
    Having done this for quite a few years and having built up quite a lot of credit card debt at 0% (£72K between my wife and I at the moment) the only problem I have encountered was lack of choice at remortgage. I imagine the same issues would apply to any form of borrowing if anything else is wanted.

    At last renewal, my main choice of provider declined my application, fortunately my existing provider had a very similar offer so it didn't really matter. If there had been significant difference it would have eaten into the savings from using 0% credit card.

    It is a significant help to have access to fee-free 0% money transfers to speed things along too - there can be unexpected lean periods followed by better periods as lending preferences wax and wane.
  • sultanoflondon
    sultanoflondon Posts: 72 Forumite
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    hugheskevi wrote: »
    I manage this in two ways. First, I project income and expenditure and ensure I can always pay minimum payments and full balance at end of offer without relying on securing new offers. As new offers are secured, money is freed up for other uses.

    Second, I invest in ISAs in addition to repaying mortgage. That provides a capital sum that can be drawn upon if necessary, although it is intended as a long-term investment.

    Having done this for quite a few years and having built up quite a lot of credit card debt at 0% (£72K between my wife and I at the moment) the only problem I have encountered was lack of choice at remortgage. I imagine the same issues would apply to any form of borrowing if anything else is wanted.

    At last renewal, my main choice of provider declined my application, fortunately my existing provider had a very similar offer so it didn't really matter. If there had been significant difference it would have eaten into the savings from using 0% credit card.

    It is a significant help to have access to fee-free 0% money transfers to speed things along too - there can be unexpected lean periods followed by better periods as lending preferences wax and wane.


    Thanks very much for your extensive reply.

    I'd really appreciate a numerical example of income and expenditure as you mentioned in your first paragraph to further understand what exactly you mean. How can you pay the full balance at the end of the offer period whilst still paying some if not all of your mortgage using a 0% credit card? Surely you can't do both?

    Thanks again!
  • hugheskevi
    hugheskevi Posts: 3,854 Forumite
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    I'd really appreciate a numerical example of income and expenditure as you mentioned in your first paragraph to further understand what exactly you mean.
    I keep detailed records and projections of income and expenditure, taking into account everything. In the table below, the initial 'income' figure for January is my current cash balance then everything projects forward. Spend here takes into account minimum credit card payments plus the cost of paying off the balance of cards as offers expires - hence the large spend spikes, for example in May.

    2607t47.jpg

    I ensure that my position at month end isn't negative, ie, that I will be able to pay off all cards even if no new offers are secured.

    Now assume I successfully apply for a 0% offer. I add the details to the spreadsheets, and can use some or all of this new money for mortgage or ISA investment (or in the past, pension investment).
    How can you pay the full balance at the end of the offer period whilst still paying some if not all of your mortgage using a 0% credit card? Surely you can't do both?
    This method gives security against default by using future expected income. It means not all of the 0% money from cards is available to use for other purposes, but is much more secure against unforeseen circumstances.

    I currently have a bit over £72K of 0% debt and a cash balance of £21,818 as shown in the table above. In the worst scenario, future income plus the £21,818 would enable me to repay all credit debt as offers expired. I could gamble that I would be able to get new offers (as is likely), and use that £21,818 as well, but that would of course be a risk (which in my case would mean I would sell of some of my ISAs to fund - not a big deal, but not something I would want to do). This way, I don't need to be concerned about not getting new offers, but can still use about £50,000 of money from 0% offers toward mortgage and ISAs.

    A big help is that I have access to fee-free money transfers from a credit card (from which I then transfer the balance to the 0% card I have just applied for), which ensures that as soon as I am offered a new 0% deal I can immediately take full advantage.
  • sultanoflondon
    sultanoflondon Posts: 72 Forumite
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    hugheskevi wrote: »
    I keep detailed records and projections of income and expenditure, taking into account everything. In the table below, the initial 'income' figure for January is my current cash balance then everything projects forward. Spend here takes into account minimum credit card payments plus the cost of paying off the balance of cards as offers expires - hence the large spend spikes, for example in May.

    2607t47.jpg

    I ensure that my position at month end isn't negative, ie, that I will be able to pay off all cards even if no new offers are secured.

    Now assume I successfully apply for a 0% offer. I add the details to the spreadsheets, and can use some or all of this new money for mortgage or ISA investment (or in the past, pension investment).

    This method gives security against default by using future expected income. It means not all of the 0% money from cards is available to use for other purposes, but is much more secure against unforeseen circumstances.

    I currently have a bit over £72K of 0% debt and a cash balance of £21,818 as shown in the table above. In the worst scenario, future income plus the £21,818 would enable me to repay all credit debt as offers expired. I could gamble that I would be able to get new offers (as is likely), and use that £21,818 as well, but that would of course be a risk (which in my case would mean I would sell of some of my ISAs to fund - not a big deal, but not something I would want to do). This way, I don't need to be concerned about not getting new offers, but can still use about £50,000 of money from 0% offers toward mortgage and ISAs.

    A big help is that I have access to fee-free money transfers from a credit card (from which I then transfer the balance to the 0% card I have just applied for), which ensures that as soon as I am offered a new 0% deal I can immediately take full advantage.


    That's great, thank you very much and well done for making it work so well for you!

    I admit that one part that I didn't understand was how you use £50k towards mortgages and ISAs. Don't you need to keep this with you just in case you don't get any further 0% offers and need to repay the full balance on credit cards? Or is that £50k balance spread across many cards that would not mature at the same time?
  • hugheskevi
    hugheskevi Posts: 3,854 Forumite
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    edited 13 January 2019 at 6:58PM
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    I admit that one part that I didn't understand was how you use £50k towards mortgages and ISAs. Don't you need to keep this with you just in case you don't get any further 0% offers and need to repay the full balance on credit cards? Or is that £50k balance spread across many cards that would not mature at the same time?
    The 0% credit balances are spread across 9 cards at the moment - that is typical, although the number varies over time. The average credit limit is about £9,000 but is quite variable, ranging from £3,000 to £18,000. It can be frustrating to be offered a low limit, as by then you have the application on credit file so may as well take it, so I focus attention on lenders with a reputation for giving larger limits.

    Due to being spread over a number of cards, they all mature at different times. It is undesirable for a high amount of credit to all mature at one time as then you need to keep back a big chunk of capital to meet the potential repayment demand if you don't get another offer, but it often happens that way as I usually go through 2 or 3 rounds of applications each year and the offers are often for 12, 15 or 21 months so the longer offers can sometimes inadvertently coincide with shorter offers.

    One thing to note is that once you have large amounts of credit available, lenders may be reluctant to offer more, or if they do it isn't much. That might require repayment of some cards as they fall due and then later rebuilding the amount borrowed by taking out more offers. Obviously that isn't an ideal set of timings. My outstanding credit card debt typically ranges between about £50-£80K.

    As there are a large number of cards to meet monthly repayments on, plus a reasonable sized amount of capital held to meet potential demand, I also have quite a few banks accounts to take advantage of interest and other rewards from the bank accounts, paying the credit cards from those accounts to meet direct debit requirements.

    The £50K is not needed as security against not getting more offers, as I can rely on the £21,818 plus future income to meet credit card repayments if necessary. So the £50K can be used for anything. If used for a pension it is out of the picture as it cannot be accessed. If used to reduce mortgage it is then unavailable for anything else but has reduced the mortgage balance. If used for ISA it is then available if required, providing another buffer if everything else goes wrong.

    As credit cards are paid down I am constantly replacing them with new offers, updating the cashflows, and releasing money for investment/mortgage repayment such that I can always pay off the credit cards from cash savings plus income if necessary.

    Think of the strategy not so much as using 0% credit cards to pay down a mortgage, rather that it is using 0% credit cards to costlessly borrow against future income to enable you to pay down mortgage now.

    There is going to come a time in the next few years where I have invested as much into pensions as I want, my mortgage is paid off and I can make full ISA contributions each year for my wife and I. At that point I'll start winding down the 0% cards as I'll have limited use for extra money.
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