Pay off home loan with credit card balance transfers?

[Coleroo]

I was thinking about something, but its a little more complicated than I can figure out....

Our current 30 year fixed mortgage has an interest rate of 8.99% (82,500 left on it, $675 / mo payment). We wont be in the position to refinance for another 2-3 years. I will have my last bit of credit card debt finished off in less than 6 months - and will be left with a credit line on one card of $11,600. My husband and I cut up our physical cards months ago and we have "de-credited" () ourselves (gotten out of the habit of swiping the card! whoohoo!).

What I was wondering, would it beneficial to do a "special offer" balance transfer (that i always receive from them... like 3.99% until balance is paid, etc) of lets say $10,000 from the principle of the mortgage to put on the credit card. I figure if we put 500 per month on that card then (thats less than we've been paying to get our current CC debt paid off anyway) we will have it paid off in less than 2 years (the card), then we can turn around and do it again. We will not be putting any more purchases on the card since we dont use credit anymore, and we have no problem paying bills in large amounts.

I know some might say just take that extra 500 / month and put it towards principle on my mortgage anyway - but would it be more beneficial to have the $10,000 chunk removed from the mortgage immediately? How much interest would that save vs. paying a minimum 500 / month directly to principle? (I hope Im clear enough.. this is complicated..lol).

I also know that mortgage interest is deductable, but CC interest is not ---- however, our itemized deductions never surpass the standard 10,500 (for married couple) we get anyway, even with mortgage interest calculated in (its pretty low since we bought cheap anyway). So the tax savings of paying interest to the mortgage instead is a mute point to me.

Has anyone else ever tried this?

I guess to sum up my question, how do I calculate how much savings we may incur by transferring a 10,000$ chunk of 8.99% mortgage principle to a much lower interest (3.99% for life is what im looking at) credit card we will pay off in $500 per month chunks?

[Hot dog]

I was going to ask the same question so I am interested to know the answer. I was thinking of putting my second mortgage on a CC at 2.99 for the life of the loan instead of at 7.25 that it is at now. How do we figure this out?

[LivingAlmostLarge]

Do it. Why not? A guy on another board paid his mortgage in $60k chunks at 0%. CC aren't bad and neither is having a balance depending on the purporse.

[Ima saver]

You will save about $500 a year in interest by doing that. $10,000 at 8.99% equals $899 interest per year. $10,000 at 3.99% means you pay $399 per year. A savings of $500.

[Coleroo]

You will save about $500 a year in interest by doing that. $10,000 at 8.99% equals $899 interest per year. $10,000 at 3.99% means you pay $399 per year. A savings of $500.

whoa... THANKS INA! it didnt even occur to me to think of it like that!! Sounds pretty good to me.

I think I'll do it once I get my final CC debt paid off in about 6 months!

[Hot dog]

Here is the thing that I can't figure out. You usually have to do a balance transfer and if you don't have any other balances than how do you do that? Sometimes you do get an offer like that with a balance transfer check but most times it is for a new account. I do have one for 3.9 with a check but with a new one I would get 2.9 and there is always a 3% fee for checks so if you use a check from one account so that you can do a balance transfer and get a good rate on the other you still have to pay that fee.

[MonkeyMama]

One word - CitiCards

I hear they offer checks or even direct deposits to your bank for BTs.

Or you can open a CitiCard and have the BT go to it. IT is really easy to ask for a credit refund - you can just request it online.

I am taking some BTs to earn money in the bank, so giving it a whirl. I already transferred money from one card to Citi (which had $0 on it) and requested my refund of the credit balance online. Overall was as simple as promised. Took a couple of weeks to receive the check. Technically you can do this with any company but you have to call the others to ask for refunds and some of them get snippy. I think I read MBNA refused or put up a hassle, so be careful. But CitiCards have a lot of cards with no BT fee offers, will just send you cash directly, etc. I Wanted to avoid any hassle so went with Citi as a way to get BT money. The only reason I never thought to try it before was I did not realize you could take a BT in the form of cash from some companies. (Nor would I figure out the credit refund thing on my own.).

[Hot dog]

I am trying to understand what you are saying. You say get a citi card and get a BT in the form of a check for say 10,000 and they do not charge a fee. then take the offer for 2.9% for the life of the loan and transfer the 10,000 from the citi card to that specific card?

[MonkeyMama]

No I am saying either or. You got the first part right - to use Citi to get cash (BT) with no fee.

OR you can transfer money from any other card to Citi, regardless if there is a balance on the Citi card, and just ask for a refund of the credit balance. They send you a check and you deposit it in the bank to earn money. In this case if you already have an offer from another company, then opening a Citi card would be a good way to get the money. Do the BT to Citi and then ask for a refund. It is just a simple step online - no hassle.

Of course it depends if you have room with your credit score and all that to open another card. But it is a way around it - I just did it myself.

[Frugalicious]

I am interested in this approach as
well.
I did recently "borrow" 21000.00 from
a chase credit card at 0% until May 08.
I put it in my mma at 5.16%.
Borrowing on a large scale (250000K)
could be another way to make interest income to pay down a mortgage as well...

[disneysaver]

Be sure to check the transaction fee - some CC companies charge a flat 3-4% fee with no maximum. Some cap the fee at some other amount. I've seen some with a max fee of $75.00.

[cptacek]

One thing to remember is that you owe $82,500 on your mortgage. If you get a loan for $10,000 and pay all of that to the mortgage, you now have a mortgage balance of $72,500, but unless your bank allows you to re-amortize it, you still have the exact same payment to the mortgage company PLUS the payment on the new loan.

If cash flow is not a problem, (for the OP, it looks like they will be able to swing it, but I wanted to bring this up for anyone else who might be thinking about doing it) and you can do this, then yes, do it. But, if you are strapped for cash, you just added another monthly bill you might not be able to pay.

[jamai]

do it but be carefull, some lenders are always waiting for you to fall into the trap of missing a single payment then the interest free is no more.

[Ima saver]

Don't pay late either. not ever. I pay my statement the day it gets here, because they only allow me ten days to get the payment to them.

[neatdesign]

You can save money by doing a BT at 0% (or some other APR that's lower than what you're currently paying) -- that much is obvious. Some of what you must keep in mind is:

- Most BT offers come with a fee, typically 3% of the amount you're transferring. Some have a cap ($75, for instance) but more and more you'll see there's just a minimum BT fee but NO maximum.

- Find out what the payment allocation will be if you already have an existing balance on the card. Usually the bucket with the lowest APR will be paid down first, which means you could be stuck with a portion of your balance at a higher APR for a very, very long time.

- Find out what your minimum payment percentage will be. Most people don't think about this before they do a BT, but believe me, if the minimum payment percentage is higher on the BT account than it was on the original account, you could be in for a real shock. I encountered this a bit when I worked for Capital One, particularly on the high credit limit accounts. Someone could transfer $30,000 to their new Capital One account, only to find out after the fact that their minimum monthly payment has gone from $900 (3%) to $1500 (5%) -- and they suddently couldn't afford the payment. Problem is, it is rare that the minimum monthly payment percentage is included in the offer's terms -- you don't usually find that out until AFTER you've done the transfer. So before you act on it, call up the credit card company and ask. If they can't tell you what the minimum payment percentage will be, then consider skipping the offer.

- I have yet to see a credit card offer that doesn't include in the fine print, "This creditor has the right to change your terms at any time and for any reason." Currently, they are only required to notify you of any changes 15 days in advance -- which is really NOT a lot of time. You don't have to necessarily be late on a payment to get your APR jacked up. Just something to keep in mind.

~ Jenney