So I have no debt on any cards. I keep getting silly offers for money transfers interest free for one year. Combining limits that's around £50k. They all charge a 2% transfer fee. My mortgage is 2.5%. Unlimited overpayments no penalties and can get all my overpayments back at any time.
Was thinking of moving say 20k to the mortgage from money transfers and save the 0.5% for one year, hammer more overpayments and then pay cards back at end within interest free period.
Obviously will have to pay the minimum each month on cards but that's not a problem.
Don't want to change mortgage (I know I could get a better rate) but want to hit the debt hard for 1 year before I move.
Sorry for boring Saturday topic.
Where is the 20k coming from in 12month time to repay the cards and can you transfer mortgage debt onto a credit card?
Money will come from overpayment buffer (mortgage) back to cards.
Money transfer (not a balance transfer which is different)... So money from cards, into bank acc... Then into mortgage. Keep it there for a year (lowering interest for that year) then move it back to acc from mortgage then back to cards.
The way I see it... Its an easy way to save 0.5% of the mortgage rate unless I am missing something! Which is entirely possible.
How much will the minimum payments be on £20k for a year?
The difference that I can see would be £100 of interest over the year.
Or am I not understanding this?
Minimum payments will be OK as have savings. That will only reduce the amount I pay back.
The difference I see is the rate. I borrow money for a year at 2% interest (the money transfer fee) then I use that money to put on mortgage which the rate is 2.5%
The mortgage debt reduces for a year (where I would be paying 2.5%).
This only works for a year though in the interest free money transfer period. Reducing the overall mortgage debt for one year (borrowing money at a rate of 2%) will in effect save me money as I would have been paying 2.5% on that amount.
Actually been googling at there are people doing this on the money saving expert forum so I am not alone in my thoughts!
I think your logic is sound but the problem is that you’re only going to save £100 in interest as per big black shed.
Min payments on £20k would be £500 to £1000 a month (2.5% to 5%) if you’ve got that sort of spare cash each month you may be better making the over-payments monthly.
Seems bonkers just to save a few quid.
It’s just stoozing, people have been doing it for years. Can’t really see the point in it for £100 myself.
If you just paid the value of the credit card minimum payments (assuming 5%) off the mortgage instead, with 10 years to go that would save you £2500 over the life of the mortgage with none of the faff.
If your admin is *really* good, and your mortgage *really* lets you do *both* the payment to the cards and subsequent payoff of the cards, then maybe do it.
But it does seem hardly with the effort: you only need to be one day late with a payment any time during the year, or at the end of the interest free deal and you’ve lost all your gains.
I’d use the money you are planning on using to make min payments with and use it to make overpayments! Otherwise lots of peril for a really small return on 20k risked
Yeah ta fellas
I think the saving would be more than 100 though won't it?
Let's say a 100k mortgage at 2.5%. Take off 20k so that's down to 80k. Mortgage interest is compounded so will make more of a saving over the year as the current payments won't change (in fact I already overpay) so will be making more of an impact over the year.
I think anyway! 🙂
The minimum payments to card will just reduce the amount at the end I need to pay back.
Maybe I will just buy a new bike 🙂 and be done with it ha.
just buy a new bike
Is the correct answer.
My Dad did this for years but when ISAs etc were paying back decent interest.
Smart man, manmaging partner at a bug accountants firm but evidently was very risk averse and rather than buying property he chased the free money. You could literally play a game of cards with his credit card 'portfolio' and he had about 50 at one point.
Seemed reasonable until his dementia set in and he started missing a few payments and before we could get them all shut down.. then it probably all ended up as a wash.
Sorry to hear that dirks
Basically you'll do all this for £100. Maybe a few pennies more. The compounding will be tiny. The interest in mortgages is a small element now
I suppose you might make £20 per hour spent if it takes 5 hours of faff
I assume you've made sure every utility and insurance is a good deal. If not I suspect you'll save more doing that
Can you actually get money out of the mortgage easly?
Scratch that - just reread the original post.
Trying to get my head around this, you might be taking, say, 20 grand out of the mortgage pot, but you're not paying anything off that 20K in terms of your mortgage so you're just slamming 20k back in again at the end of the year. Feels like theres an effect on your mortgage for some reason but I'm not clever enough tonight to think that through fully.
This is the thing... I am sure there is a bigger impact than just the interest saved.
Mortgage interest for 1 year is £2500 (on 100k at 2.5%)
On 80k (if I transfer say 20k over) that means I will be paying £500 less interest over that year.
For that one year, More of my monthly repayments (which will not change with the reduction) will pay off a higher percentage of capital.
I don't think its as simple as the 0.5% of 20k as people are saying above.
But then I still need to pay a fee of £400 for the 20k transfer meaning back at the £100! Time for a spreadsheet to work it out properly. Now is not the time after beer. Thanks all for input 🙂
Seems like way too much work for £100.
Is there not an easier way to earn £100 over 12 months?
Take the 20k and lend it out on a peer lending site? You make way more than 1/2% ?
There are several Peer 2 Peer accounts that pay 5%+ on a 30 day notice account with your funds managed by them across hundreds of borrowers. Your risk is minimised and you can even wrap it in an ISA to save tax on the interest. Your £20k can earn you £1k of tax free interest for very little admin effort.
Always read the T&C's, the value of your investment may go down or up, funds are not guaranteed yada yada yada.
Wouldn't you be better off using the cash that you're going to 'hammer the overpayments' with to reduce your mortgage faster? I know you're trying to play the interest rate game and save yourself .5% interest?
I utilise interest free credit cards and have used money transfer before and you need to maintain a minimum payment per month...if you miss a monthly payment you get hit with interest at the usual 15% or so, so you need to take into account the monthly minimium payments to maintain your interest free interest rate over the year, subtract those minimum payments form the money you think you's save from the 0.5% interest rate improvement and see if its still worth your while.