Will the amount that you’re paying 5.74% on reduce over the 13 months, so towards the end it may be 5.74% of a smaller and decreasing sum. The total may be less than a flat 3% of the principal.
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Looking for a bit of advice on potential pitfalls in what I intend to do.
We’re overpaying our mortgage quite heavily with a view to it being gone in the next 4 years. I appreciate it’s not something that makes perfect financial sense but it’s something I want to do.
The mortgage is in 3 parts and the smallest (£12.5k) is out of its fix on 31.10.22. That bit is currently around £100 pcm and we overpay £840 pcm across all parts of the mortgage. We're at the point where we'll be penalised for the overpayments across the whole mortgage.
I had intended to let that fall on to the SVR and then focus all overpayments on it because there won’t be any early repayment penalties once the fix has ended. It would then be repaid in around a year.
The SVR is now 5.74% but I can get a money transfer credit card at 0% for over 12 months at a fee of 2.99%. I intend to take £12.5k on the credit card, pay off the mortgage and then repay the credit card over the next 13 months at £940 per month.
All overpayments on the other bits of the mortgage would stop and then start again after 13 months.
Any advice on this would be greatly appreciated. I can’t see any significant drawbacks but thought it prudent to check if anyone else can?
Will the amount that you’re paying 5.74% on reduce over the 13 months, so towards the end it may be 5.74% of a smaller and decreasing sum. The total may be less than a flat 3% of the principal.
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Sorry to hijack your thread but what are peoples thoughts of this situation.
£105k fixed until November 2023. 2.5%
Option to change product and fix for 5 years available. £1.1k early repayment charge.
New payment will be £96 more per month than currently paying.
Obviously this is the best part of £2.5k more expensive in the short term but I’m spooked about what my rate could be in 14 months time if this madness continues.
Would you sit tight or fix? If rates get up to 7% then I reckon over a 5 year period I could be as much as £6k better off over a 5 year period. I’m not 100% sure of my maths though.
Yeah, credit card option will only save you about £75, though that assumes the SVR will stay at 5.74% for the next year???? Plus there's the risk you wont get a high enough credit limit on the card to borrow £12.5k anyway (they only usually let you take 80-90% of your limit), plus having a credit card balance over 70% of your limit puts a downer on your credit score.
I know a couple who are finishing their mortgage in the next 12 months. About 24 months ago both the husband and wife took out multiple 0% fee-free bank transfer cards they could and signed into a 2 year fix.
This allowed them to nearly half the mortgage borrowing so half the interest. No downside for them so far just some initial admin with the different cards and getting them all to have roughly the same DD date. They're still overpaying up to 10% on the mortgage balance too.
I would do the same if I could.
I remember when we entered the era of extremely low base rate back in about 2008. I'd just taken out my first mortgage a few months before the financial crash. I was trying to find out the rate I was on but can't find it in my old emails.
One thing I can't remember...were interest-free credit cards and shopping a thing back then? If not, wondering whether they will be around much longer.
They were definitely around back then, zero fee back then too. Around 2003-2008 i used to partake in an activity called 'stoozing', making cash from 0% 0 fee credit cards. Had £40k on interest free cards with the cash sat in a high interest account earning 5%. Was a nice little earner for me at the time. Once the 3-4% fees came in, i stopped.
Yes, I think this was common, I heard about this before.
I guess they rely on people spending the money and then getting stung by the follow on rates. The % fees they now charge are slightly annoying, but there are some out there that don't (usually only for balance transfers or purchases).
Some people still stooze by putting all of their work and personal expenses on 0% cards and banking as much of their salary in savings accs as possible. Seems like too much imo but 40k in 5% was a no brained.
Ah thanks.
Back in 2007 at the time of my first mortgage, I'm pretty sure I was borrowing on 6%, which seems eye-watering now. My mortgage is currently over double what I originally borrowed for my first house and I don't pay much more in monthly payments. How we got used to low base rates!
Also OP, are you sure that your mortgage provider will accept payment via a credit card? I'm sure i read something in the past that you could pay your mortgage using one
Might be worth checking before you commit
John