Using credit card to pay mortgage

valor rorghulis

Cleared off my loans and credit card recently. Just got some student loan remaining and once that’s done I’ll be able to pay approx 1k per month extra off my mortgage

Was just thinking, there are some credit cards on the market that do 0% interest rates for first 12 months

Were I to get approved for 10k on one of these, is it possible to use it to pay a chunk off the mortgage? Idea being to then pay the credit card off before interest kicks in and get the benefit of the reduced capital balance immediately

I get that there’s a risk that I could lose my job and then have a big card balance, but if willing to take that risk curious if it’s possible. Guessing Introductory 0% wouldn’t apply to atm withdrawals

Peregrinus

No. You generally can't use credit cards to settle other debts. You'll also find that the 0% interest deal doesn't apply to cash advances on the card, so you can't draw out cash and use that to reduce your mortgage.

jimmycrackcorm

Isn't the 0% interest a balance transfer from another card? In which case you'll be paying 0% interest on that balance and not your mortgage.
It sounds like you're thinking you an run up 10k on a new credit card straight away with 0% interest for a year while paying off a mortgage then that's crazy talk.

However if, you pay off 10K on your mortgage using your existing credit card, then transfer the balance to another 0%/12 month card (before running up the interest bill), well that's ingenious.
Good luck with that though; a credit card history of paying your mortgage via credit card debt is a huge red flag. But in practice it might be possible to request a 10k balance transfer; have a good ISCB credit record and just do a 10K CC mortgage pay-off via your old card.

But somehow I think you haven't thought this through.

valor rorghulis

So I actually found a way to do this.

I've been paying off an extra 1500 per month on mortgage the last few months. The other day get an email from credit card company saying "We're doing 0% bank transfers this month". Once you repay the balance within 6 months. So transferred 9k to current account, then transferred that to mortgage.

Now I'll pay the 1500 per month to credit card and the balance will be cleared within 6 months, just before any interest would start kicking in. However get an immediate reduction of interest on the 9k on the mortgage. Not a huge saving, but better in my pocket!

May be a once off thing, as repeating the process basically depends on if my card provider doing the promotion again in 6 months.

coylemj

I'm curious as to exactly what your CC company means by a 'bank transfer'. Because what you have done is to effectively execute a cash withdrawal using your credit card and you're expecting a 6 months interest-free holiday. I know you didn't actually get cash in the hand but, in theory, you could have gone to your bank and withdrawn that 9K over the counter. Which is why I call it a cash withdrawal. As opposed to using your card to buy that much worth of carpets or furniture.

It just sounds too good to be true. Keep an eye on your CC balance, in case they start adding daily interest.

Sarn

I’d echo the above. My concern would be that the interest free period on your current card only applies to card purchases and not money transfers.

Jim2007

Well at some point the credit card company intends to make a profit out of this and a lot of work will have been done to make sure that happens. I would imagine that they have already identified the possibility of people 'borrowing' of them at zero percent, while they also loose out on the commission for retails sales and taken steps to prevent that from happening...

My advise would be to ignore the marketing bumf and read all the legal documents that come with the account very carefully, I would be very surprised if there is not some restrictions placed on interest free part of the agreement.

Lujan

I used to work in mortgage collections.

My place never accepted a mortgage payment from a credit card.

Not sure about other institutions, but I can't imagine they would accept it either.

coylemj

https://www.boards.ie/discussion/comment/117679750#Comment_117679750

OP is not paying the mortgage from his CC account. He withdrew 9K from the credit card, transferred the money into his current account and is paying the mortgage from there. So the mortgage company isn't seeing any CC transaction.

Lujan

https://www.boards.ie/discussion/comment/117679998#Comment_117679998

Apologies, I misread the post

The J Stands for Jay

https://www.boards.ie/discussion/comment/117679517#Comment_117679517

I've done it in the past, the bank transfer to current account for 0% interest for 6 months on the credit card. Worked perfectly

Peregrinus

Currently, the Central Bank interest rate is negative, meaning that it costs your bank money to deposit their funds with the Central Bank. And they are required by law to deposit a proportion of their fund with the Central Bank.

So, it's profitable for the bank to lend the money to you at 0%, if this reduces their funds, and so reduces the amount they deposit with the Central Bank, and so saves on the negative interest they pay to the Central Bank.

But it's not profitable if you promptly turn round and pay the money back to them in reduction of your mortgage. Because now their funds go back up, so they have to deposit with the Central Bank, plus they are losing the 3% (or whatever) interest they would have got on the amount of the repayment, if you hadn't repaid.

So, my guess is that the credit card issuers most likely to make these 0% bank transfer offers are the ones who don't offer mortgages, etc. If you take their offer and use the funds to reduce your mortgage, you'll be paying the funds to a different bank, which doesn't bother them.

Credit card issuers who are also mortgage lenders will either not make these offers or, if compelled to by competitive pressures, will try to structure them so that they are not easily taken up by customers who also have mortgages with them.

coylemj

So, it's profitable for the bank to lend the money to you at 0%, if this reduces their funds, and so reduces the amount they deposit with the Central Bank, and so saves on the negative interest they pay to the Central Bank.

Surely giving out free money (especially to credit card users) would attract the wrong sort of borrower, thereby leading to bad debts? And wouldn't that negate any financial gain the CC company might make by avoiding negative interest rates on excess cash?

Peregrinus

Well, I dunno. They may only extend the 0% bank transfer offer to existing cardholders, and not necessarily to all of those — only to those who they regard as very low risk of default.

Whatever, they are offering 0% cash transfers right now. Presumably they are satisfied that, even taking the risk of default into account, this will be profitable for them.

jimmycrackcorm

It looks like it is Avant Card Transfers | Avant Money who are providing this. I might consider doing this myself, I'd just need to work out how much mortgage interest I'd save to see if it is worth the hassle. Because the money has to be repaid in 9 months, you'd have to either have it to spare, which is doing nothing anyway or the extra cash monthly to cover it. If you have the extra cash monthly to spare, then the question becomes, why not put that towards your mortgage anyway, and then how much is the savings front loading that amount.

Peregrinus

Well, let’s see. Picking figures out of the air:

Suppose your mortgage is at 3%. Suppose you can borrow €10,000 on your 0% bank transfer offer for 9 months.

Obviously, you can borrow €10k from your credit card, pay it into your mortgage for 9 months, then reborrow from your mortgage account and repay the credit card. This costs you nil on your credit card, and saves you mortgage interest of 10k x 3% x 0.75 years = €225. 

That’s your maximum saving. Suppose your strategy is not to reborrow the money from your mortgage account to repay the CC debt, but to save €10k out of income over 9 months, and use that to repay the CC debt? Well, you could of course have not borrowed from the CC account in the first place, saved the 10k and paid it into the mortgage account. Both strategies yield a long-term saving of €10k x 3% every year going forward; there is no difference between them in that respect. But by borrowing from the CC now you save €225 interest over then next 9 months, while you are saving the 10k, whereas if you just put the 10k into the mortgage account, bit by bit, over the 9 months you would save something less than €225 - maybe about €112.50?

So, basically, no matter what you do, on these figures the extra mortgage interest you can save by using the 0% transfer offer as opposed to other strategies maxes out at €225. The calculation is [amount you can borrow from CC account under 0% transfer offer] x [period in years before which you have to repay CC account] x [annual rate of mortgage interest that you pay].