How does this mortgage pay down strategy sound?

[imported_richy]

How does this mortgage pay down strategy sound?

The purpose is to help pay down the mortgage faster using 12 months "0%" balance transfers.

I will use round numbers to show this idea.

Current Mortgage amount: 150k and mortgage payment (PITI) = about 1k.

April 1, 2008 - balance transfer 10k at 0%. Use the 10k to immediately pay down mortgage.
Balance at May 1, 140k + interest. Pay 1k in normal mortgage payment.
Each month send 1k into the credit card company to paydown "0%" loan. Pay off the balance by 12th month.

Assumption: User has good credit and extra cash to pay the credit card company. No BT costs.
Risk: missed payment. Resolved by having auto bill pay.
Benefit: Faster Paydown of principle amount

Is there something better? Please give me some ideas.

Richy Rich

 

[vi edit]

My question is - how do you get that $10,000 on the card over to the loan?

 

[Viper GTS]

Really not worth the potential drawbacks.

Let's say you had a really nice CC offer that allowed you to put off making ANY payments for that entire year, & you could just pay it all off at once when the 12 months was up.

So absolutely best case (and totally imaginary) you could save 1 year's worth of interest (at your mortgage rate) on $10,000.

If you have a 5% mortgage that's $500 in one year.

Is $40-50 a month worth the potential risk, the hassle of making double payments, and the hit to your credit score?

IMO it's not even close to being worthwhile.

Viper GTS

 

[imported_richy]

You can transfer 10k into any of your existing credit card as count. Then immediately request the over-payment check.

 

[goog40]

Why even pay the CC $1k a month during months 1-11? Since it's at 0%, just pay the minimum (if there is even a minimum at all, I have no experience with BTs), and pay off the the rest of it in month 12.

 

[FoBoT]

sounds like madness to me

 

[thomsbrain]

If you use your $10K to "immediately pay down mortgage," you're still going to owe the bank $1,000 next month AND owe your credit card company for the $10K you took out. Most loans only allow you to get one or two months ahead, and will only credit one month per individual payment. After that, you can pay down your balance faster, but you still need to make your monthly payments.

You could put that $10K into a savings account and use it to pay your mortgage as it goes along through the year, but I just don't see this being worth the hassle.

Also, a lot of those 0% APR offers are contingent on never actually using the card for a purchase, making all your payments on time, etc. Lots of ways to screw this up.

 

[Cuda1447]

Originally posted by: FoBoT
sounds like madness to me

madness?

 

[MikeyIs4Dcats]

well, aside from the obvious drawbacks of losing deductible interest on your mortgage, you might want to read up on the tighteneing CC market and how 0% offers are going to become scarce and how the BT fees keep rising.

They are finally fed up with the freeloaders....

 

[beat mania]

Originally posted by: goog40
Why even pay the CC $1k a month during months 1-11? Since it's at 0%, just pay the minimum (if there is even a minimum at all, I have no experience with BTs), and pay off the the rest of it in month 12.

Yeah, paying anything more than minimum payment at 0% is just throwing good money away. Minimum is probably only around 1-2% of total. Just stash the rest in a 12 month CD at whatever 3.xx rate you can find right now. Take that out of the bank and pay off the bt at the end of the 0% period.

 

[SSSnail]

Originally posted by: Cuda1447

Originally posted by: FoBoT
sounds like madness to me

madness?

SPARTA?


Someone has to do it.