Stoozing is a false economy - cost to credit rating

vacheron · 15 July 2019 at 2:19PM

MatthewAinsworth wrote: »

Vacheron - you would've paid more interest on the balance that way possibly? Assuming the mortgage was greater than the amount of cash you have and assuming that the offset rate was higher (sounds it) than normal mortgage fixed rates

Since you can get 2.something % on what cash you have by fixed savings, or mortgage overpayment.
Because unless you have a large amount of cash why offset? As you know you can borrow at 0% anyway so why would anyone borrow at a mortgage % unless to clear a stooze?

You make number of good points which are certainly worth being mindful of for Offset mortgages, and they certainly aren't suitable for everyone. I'll explain my reasons for taking out mine.

When I bought my house in 2010 I had a deposit of about 80% and knew that I would be in a position to clear the mortgage in about 12-18 months. As 12-18 month mortgages for 20% loan to value do not exist and regular low value mortgages came with higher fees and early repayment penalties, I instead took out an offset mortgage with a 70% loan to value (as that had the lowest fees and rates at the time) and then immediately offset the savings I had available due to paying a 30% rather than 80% deposit.

Within 12 months the mortgage was completely offset and so it was now costing me nothing to retain a six figure of instant access line of credit for the next 24 years. It also meant that I do not have to re-mortgage every 3-5 years to get the absolute best rates (something I would have to do if I had a separate mortgage and savings accounts) nor do I have to pay the associated costs and fees each time.

As I was planning to extend and modify the house in the future this was a prefect way of doing so as it was completely flexible, instant, and far cheaper than re-mortgaging or releasing equity, however, when the time came to do so, there were lots of 0% purchase and balance transfer deals bouncing about, so instead of drawing from the mortgage, i paid for a significant amount of the costs using 0% cards, this retained my savings in the mortgage meaning that I did not need to pay interest on the funds, but had instant access if time was ever called on any of the cards without having to sell any long term investments at short notice.

Regarding why offset rather than just borrow for purchases, try getting a car garage to take payment in full for a car (or a builder to take a 20K stage payment) on a credit card!

This is just why it works for me, but I think the truth holds that unless you hold at least 30% (i think someone worked out once) in cash offsetting your mortgage amount, the pro's "generally" outweigh the cons.

System · 15 July 2019 at 2:40PM

Aahh I see, its the large deposit which is unusual but whilst others would say upsize, ride the property market, I think its better to have minimum house (bills) and maximum in pensions (outperforms property). Very commendable to have such a large deposit. Do you need immediate access to all of it? If not perhaps its worth investing some instead? And after home upgrades are paid for....

I plan to only buy banger cars lol, since they don't devalue as long as you renew the mot and if a big bill is on the horizon just scrap it. Newer cars don't seem any more reliable and there's a chance a banger will become a classic one day!

System · 15 July 2019 at 2:42PM

Also every penny not in a car is a penny in an appreciating asset instead - opportunity cost

System · 16 July 2019 at 12:42PM

Jeepjunkie - how about battery life? Thats what worries me, that its a few thou for a part that lasts 4-5 years. EV makes most sense for high mileage on flat-ish ground i think, Ie vans

Ps saw an interesting idea with EV - instead of charging the battery, simply pump new electrolyte in and old out, and possibly swap electrodes - much faster than charging and doesnt involve lifting out a battery to swap it

System · 16 July 2019 at 12:45PM

Im worried that when its all EV there will be no bangers to buy, but on the other hand cheap self driving taxis would make ownership pointless, and fit in well with EV's profile

guli · 16 July 2019 at 2:35PM

Don't you need to charge the car? That's usually not free.....:j

jeepjunkie wrote: »

Not always... When I first got my cheap ~£4k EV a while back when no one wanted them I initially used stoozing techniques/funds at 0% to complete the purchase. Then flogged old city car through WBAC, winter wheels/tyres privately etc all going into the BT card, now cleared.

It cost the same price as all my previous commuter cars only this one has almost no fuel costs, no road tax [previously £145], minimal servicing etc. Saves me ~£40pw in fuel and although most people would only consider an EV as a second car it also offsets all the evening/weekend driving the diesel used to do so that's saving the wife's car ~£15pw.

So fuel and road tax ~£3.5k savings a year.

Got to get creative these days

PS Car has gone up in value but why sell when you have the gift that keeps on giving...

System · 16 July 2019 at 5:55PM

Can you sell this free electricity back to the grid?

The_Urbanite · 18 July 2019 at 1:28AM

I had a stooze pot of around £50k. It was generating a flat £1200 pa from one source, plus interest plus part became a float for sharbing which typically earned 5% daily equivalent return, usually a lot more and on occasion up to 50%. When you discover the arbitrages available out there you come to realise that the banks are taking the p*ss by tossing you pittance AER rates, if any in return for the lump sums you lend them.

I also did do the whole merry go round with many of the regular savers and filling the usual current accounts up to the limits for the headline interest rates.

However, the stooze pot is all gone. I got rid of it all, paid it back, cancelled the cards and closed a load of accounts. All that was charming but not for me for various reasons. It actually takes months to clean up your credit report which paints you someone in serious debt, I wasn't able to apply for any new rewards cards with said status and the activity attracts the kind of attention I could do without.

Moved on now but was definitely good whilst I could be asked with it!

adindas · 19 July 2019 at 3:06PM

The_Urbanite wrote: »

I had a stooze pot of around £50k., plus interest plus part became a float for sharbing which typically earned 5% daily equivalent return, usually a lot more and on occasion up to 50%. !

Assuming you are not gambling, I wonder How did you do that ?
Even the P2P will not give you such a high return.

System · 19 July 2019 at 6:48PM

Apparently it's arbritaging bets, a bit like pricing them, which if hedged right should be risk free, although I would imagine the sharbers out there probably arbritage this away, if not the betting companies themselves would. I have yet to see a hedge fund perform like that, so thank you for sharing your secret...

Stoozing is a false economy - cost to credit rating

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