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Original poster

Good Idea or Bonkers?

12 replies

Speccytacular · 26/09/2023 15:55

I appreciate taking advice from strangers on the internet is a bad idea and I should seek the advice of an IFA but just taken at face value what do you think of this idea?

Our 5-year fixed mortgage deal is due to end in May 2024. I've been looking around at what's available just now and inevitably the interest rates are pretty high. They may change by May next year, but it's unlikely.

Over the weekend an idea sprung into my head. We have some money saved up and if we used everything we had we could pay off a large sum from the remaining mortgage when it expires and we look for a new deal meaning that the interest rate hike is lessened. This would leave us with no savings, which I appreciate is a bad idea in itself.

Then I got to thinking that if we did use all of our savings it would leave us with an amount on the mortgage that we might be able to pay off if we got a couple of interest free credit cards (good credit ratings), and not need a mortgage at all.
Get the Interest free credit cards, max them out over the coming months, leaving the money in the bank and use this to pay off some of the mortgage balance in May. We'd have more than a year to save up to pay off the balances. In fact it would only take us a few of months to save enough to cover what we'd have on the cards, given we'd have no mortgage.

We've used interest free credit cards in the past to our advantage and always had the money in the bank covering what we owed on them. The only difference this time is that we'd have no money in the bank, covering what we owe on the cards, for roughly 4 months. After that we start building up our savings again with no mortgage.

My thoughts would be to do this and get rid of the mortgage rather than arrange another mortgage for a couple of years and paying all that interest, but is it daft?

OP posts:
Strawberryfieldsforeverrr · 26/09/2023 16:03

Are you allowed to service debt with debt? I always thought it was a hard no.

Original poster
Speccytacular · 26/09/2023 16:12

Oh, dunno. Hadn't thought of it that way. But I'd be paying off the mortgage with 'money in the bank'. Would they do background checks etc. if you're paying off the mortgage?

OP posts:
Chewbecca · 26/09/2023 16:20

It isn't completely bonkers, no. You'll need to do all the sums carefully and read all the t&cs of the accounts.
I do wonder if your mortgage is pretty small then the amount of interest isn't going to be huge anyway might you just throw everything at overpaying the mortgage? Keep it a bit simpler.
And have a plan B for if something happens which means you can't pay off the c card and have no savings - sickness, job loss, boiler breakdown for e.g.
Good luck - getting the mortgage paid off is a great goal.

OrangesLemonsLimes · 26/09/2023 16:22

Do you have insurance policies to cover eventualities such as redundancy and illness?

BeyondMyWits · 26/09/2023 16:25

I would never advise getting rid of all your savings, you never know when that rainy day, week, month might come.

Overpaying what you can when you can was what we did. Took 7 years off and cost 17k less.

Original poster
Speccytacular · 26/09/2023 16:32

Chewbecca · 26/09/2023 16:20

It isn't completely bonkers, no. You'll need to do all the sums carefully and read all the t&cs of the accounts.
I do wonder if your mortgage is pretty small then the amount of interest isn't going to be huge anyway might you just throw everything at overpaying the mortgage? Keep it a bit simpler.
And have a plan B for if something happens which means you can't pay off the c card and have no savings - sickness, job loss, boiler breakdown for e.g.
Good luck - getting the mortgage paid off is a great goal.

Don't want to get into specifics, but it's not a small amount. I'd call it the lower end of middle. We do overpay just now and this is what will enable us to get to within touching distance of paying it off by May.

It's just ever so slightly out of my comfort zone as I hate being in debt to anyone, never mind a credit card company albeit for a brief period. I didn't think we'd be in this position for another 8-10 yrs at least.

Thanks for the advice about a plan B etc. I suppose the plan B is the C card won't be due for another year after, and we'd need to pay the mortgage or the C card anyway. Need to have a think about this.

OP posts:
Original poster
Speccytacular · 26/09/2023 16:34

OrangesLemonsLimes · 26/09/2023 16:22

Do you have insurance policies to cover eventualities such as redundancy and illness?

Yes these are in place with the mortgage. Not sure what happens to them if we pay them off. Will look at the T's & Cs of them

OP posts:
Original poster
Speccytacular · 26/09/2023 16:38

BeyondMyWits · 26/09/2023 16:25

I would never advise getting rid of all your savings, you never know when that rainy day, week, month might come.

Overpaying what you can when you can was what we did. Took 7 years off and cost 17k less.

This is what worries me about it all, and we'd have a brief period of owing money to C card providers.

If all remains equal we could service most things (car breakdowns, boilers, holidays etc.) from our wages if it came to it. It would mean shunting having enough savings to cover the debt on the cards a couple on months down the road.

It's when things get unequal that I'm worried about.

OP posts:
BarbaraofSeville · 27/09/2023 05:52

Yes, you can do this, it's just another variation on Stoozing (Google it if you need to)

We've done that in a way in the past. I haven't looked at credit card deals recently but for the last 10 to 15 years I've carried around £15k of credit card debt that's always been totally free of interest or charges and at some point will have effectively paid off the mortgage with the credit card by putting normal expenses like groceries and petrol on a 0% spending card and used the money not spent to overpay the mortgage.

You have to be organised and not use it as an excuse to spend money you don't have but if you can get past that, there's a few ways to reduce borrowing costs or even make a bit of money like this.

Sometimes being in debt to a credit card company is a good thing. The minimum payment is often very low and if they're lending you money for free that you can use to your advantage, then why not?

Original poster
Speccytacular · 27/09/2023 10:33

BarbaraofSeville · 27/09/2023 05:52

Yes, you can do this, it's just another variation on Stoozing (Google it if you need to)

We've done that in a way in the past. I haven't looked at credit card deals recently but for the last 10 to 15 years I've carried around £15k of credit card debt that's always been totally free of interest or charges and at some point will have effectively paid off the mortgage with the credit card by putting normal expenses like groceries and petrol on a 0% spending card and used the money not spent to overpay the mortgage.

You have to be organised and not use it as an excuse to spend money you don't have but if you can get past that, there's a few ways to reduce borrowing costs or even make a bit of money like this.

Sometimes being in debt to a credit card company is a good thing. The minimum payment is often very low and if they're lending you money for free that you can use to your advantage, then why not?

Yeah, this is exactly what we're thinking of doing. I've heard of stoozing before but never used the term to reference what we've done in the past. Glad to hear it worked well for you.

Obviously there's a bit of legwork to investigate everything but there's no real glaring banana skins from what people have said, other than having no savings. I think I'd be comfortable with that for a period of time if it means no mortgage. We've been really skint in the past and managed to muddle through. The kids won't need new shoes for at least a year 😃.

OP posts:
CirreltheSquirrel · 27/09/2023 10:47

It isn't entirely bonkers. I'm doing something vaguely similar (mortgage pay off day is tomorrow!) but with a bit more wriggle room. My savings are paying off the mortgage but I have been using a 0% purchases card to build up a stoozing pot in a savings account which can act as an emergency fund until it is replenished from the money I'm no longer paying on the mortgage (plus I also have the remaining unused credit on the card in case of emergencies). I'd just be worried about those couple of months where you are a bit exposed but if you are confident you can get through them it's not insane.

MikeRafone · 27/09/2023 14:03

I would do the following

work out the extent of my savings now - so £x amount is ear marked to pay off a sim from the mortgage next May 24

This does two things, it allows you to have a cheaper repayment plan, as you’ll have a smaller loan on your mortgage.

secondly it will create more loan and better loan opportunities, as your loan ratio is lower. So you’d be inline for better deals.

Then between October-May pay checks, stop any over payments and put away an emergency fund in 7 months. Also remember you’ll have 2 council tax free months to pop in the emergency fund.

once your new mortgage is sorted, select an amount to continue overpaying the mortgage.

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