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Assuming no other costs are involved in eliminating the PMI, I would go for it. The difference in the investment rate and the rate of the primary loan would be a savings, although short term. We do this all the time with credit card debt. Kudos to you for keeping immaculate credit! Those 0% offers will come to you till you're sick of it, so make sure you exercise discipline in your financial affairs and it will always pay off for you.
Just make sure that you always pay the minimum on time. If you are even one day late you risk the chance of having the CC company rate jacking you.
I used a balance transfer check a few years ago to pay some other bills. I was offered 3.9% for the life of the balance. I couldn't imagine how this wasn't a good deal....Well there was a death in the family and I wasnt thinking about paying bills...I was less than one week late but when I got my next statement my rate had been jacked up to 29.99%. Imagine paying this on a $8000 balance! I ended having to call the CC company and begging them to drop it back done. They did give me a lower rate but I did not receive the 3.9% life of the balance back..I think it was 6.9% for 6 months an then up to 13.99. I had always been very careful about paying bills on time but sometime crazy things in life happen...
I live below my means and like it that way. I have a $100,000 condo in MI and currently owe 88,000 on it. I really would like to remove the escrow for taxes ($150 a month) and PMI now ($71 a month) by getting the mortgage down to $80,000 (80% and both drop off).
I am thinking of a somewhat risky plan and would like to hear your thoughts.
Keep this in mind:
- I am young (27) and have only had this mortgage for 2 years now.
- My credit is pretty much flawless... last score I saw was in the mid 700s.
- I have no credit card debt
- I am not worried about taking a hit on my credit score
- I have about 5k in savings in case of emergency
- I may get a roommate soon to really allow me to overpay on the mortgage even more
- I want to have this mortgage paid off in ~ 5 years if possible
So, the plan is to take a 0% 12 month check from a credit card I have and write an $8,000 check to pay my mortgage next month, which gets rid of the escrow and PMI. The escrow has a balance right now to cover all of my 2008 taxes. Then instead of simply paying back the card right away, I will put the money in my savings account, which yields just over 3% right now. I figure why pay the 0% card instead of making some interest on my money instead. Then take whatever I have in savings (it would be over 8k at that point and simply pay off the balance of the check). I would still be making my regular mortgage payments, which would reduce the principal even more during the time. Paying 8k right now also lets each of those payments hit more principal each time.
Then the following year, I would repeat the process again just to get each regular payment to hit more principal each month and to gain some interest in my saving account as an added bonus. Then pay of the 0% card again with the savings account just before the promotion ends.
It may sound risky but it seems like a great idea...
Should I do it? Anybody go through with something similar? It is all about having the money work for me more than simply making my scheduled payments, which only hit like $130 in principal each month :-P
Also consider that a computer crash, delaying online payment or the USPS operating with its normal unexplained delays could cause your credit card rate to skyrocket because of a late payment.
Also consider that a computer crash, delaying online payment or the USPS operating with its normal unexplained delays could cause your credit card rate to skyrocket because of a late payment.
People keep sayign that, but it's pretty hard to pay "late." Based on what I have seen, the card companies consider your payment late if it's 30 days late. You would have to be really irresponsible and wait until the last minute to pay your credit card. I paid off my first car using 0% cards, and I was fine. In fact, when they used to have fee-free 0% transfers, I invested the money and made a miniscule profit. Then I paid the principal back and kept the money I made! Of course now they all charge some crappy 3% fee, so I may not do that again. If the OP has no fee--or she calculates the small fee is worth the interest savings, PMI savings and risk--then she should go for it!
I realize this thread is pretty old, but I've had thoughts of doing something like this also (wish you could just somehow pay principal with a credit card directly- instead of using convenience check & fees). It all sounds possible if you are careful & organized, but aside from the card's/check's minimum monthly payments, here is the thing no one from this thread has touched on----> Wouldn't you still have to pay your entire mortgage payment each month like usual also?? Just because you paid them 8 grand (all goes to principal) that doesn't mean they'll let you skate on paying your regular house payment in full each month. Maybe you were aware of this, and you have plenty of money to do it all anyway, but I'm not sure that I'd have enough money myself... Sure I could do it on a smaller scale, but I'd always remember I'd have to pay back a good-sized lump sum before the promo period ended, in addition to my regular mortgage pymt each month- and every other expense life throws you along the way. Also, not that I'd ever pay late, but late payments can affect them letting you drop PMI early in the loan with some mortgages; and also always check for "pre-payment penalties". At any rate, this procedure the OP mentioned seems like a fairly wise plan for a person with good work ethic & credit to attempt, as long as it's carried out with care & close attention to details. If anyone responds to this, you might let me know another similar way to cut down mortgage principal with credit, or at least reassure my thinking that you'd still have to pay your regular house payment in full each month with the OP's plan here. Thanks!
I realize this thread is pretty old, but I've had thoughts of doing something like this also (wish you could just somehow pay principal with a credit card directly- instead of using convenience check & fees). It all sounds possible if you are careful & organized, but aside from the card's/check's minimum monthly payments, here is the thing no one from this thread has touched on----> Wouldn't you still have to pay your entire mortgage payment each month like usual also?? Just because you paid them 8 grand (all goes to principal) that doesn't mean they'll let you skate on paying your regular house payment in full each month. Maybe you were aware of this, and you have plenty of money to do it all anyway, but I'm not sure that I'd have enough money myself... Sure I could do it on a smaller scale, but I'd always remember I'd have to pay back a good-sized lump sum before the promo period ended, in addition to my regular mortgage pymt each month- and every other expense life throws you along the way. Also, not that I'd ever pay late, but late payments can affect them letting you drop PMI early in the loan with some mortgages; and also always check for "pre-payment penalties". At any rate, this procedure the OP mentioned seems like a fairly wise plan for a person with good work ethic & credit to attempt, as long as it's carried out with care & close attention to details. If anyone responds to this, you might let me know another similar way to cut down mortgage principal with credit, or at least reassure my thinking that you'd still have to pay your regular house payment in full each month with the OP's plan here. Thanks!
Things have changed a lot since 2008. Back in those days, I used to take out 0% BT from credit card and simply put them in savings account or buy treasury notes. Those were the days when 0% BT were real 0% (no transaction fee). Very few exists these days. Even Chase low BT fee are usually 1%
There are creative ways to play with 0% BT but they are risky if you are not familiar with the game and a backup plan. There were those that played really big during those 0% BT time. You need lots of extra cards to really play the game. At one point, I had over 25 credit cards with multiples cards from same creditors. If the creditor catches you being the type that they can't make money off, they will find a way to cancel the 0%. I got blacklisted from American Express after tanking over $75K in 0% BT. It only took them a week to realized what I was doing. It's been over 7 years and I still can't get an American Express card.
To answer your question. Mortgage payment continues every month if you decides to make extra principle payments.
What happens if you somehow are incapable of paying the CC in full at the 12 month deadline? What dies the interest get bumped to? You're better off adding a extra $20-40 to your monthly payment and applying that to principal than paying off debt by taking on debt
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Wondering things myself...
