I love extreme, creative, personal finance. So when a reader, Joe, told me about his story on paying off not one, but two mortgages with credit cards at 0% [1], I couldn’t wait to share his story with you!
Payoff Your Mortgage with a Credit Card
Joe, who is 37 years old and married, says:
I’ve used zero-fee, zero percent balance transfer offers to pay off my last home and current home mortgage. In a nutshell, I took out roughly 40K in balance transfers (I knew I could cash flow these and pay them off before they came due) between 2 credit cards and applied that money towards my mortgage.
I was hooked, and couldn’t wait to hear more from Joe about it. He loves telling this story, so he was happy to share the details with us (thanks Joe!).
How to Payoff Your Mortgage with a Credit Card
Joe used the strategy twice. Here’s more on how Joe did it the most recent time with his current house:
- Joe took out 2 no fee balance transfers, similar to the Discover More and Chase Slate offers* right now.
- He paid off $38,598 of his 6% mortgage with the 2 credit cards (he used a Countrywide card and a Commerce card at the time), leaving $62,000 on his mortgage.
- He then made payments to the credit cards, and because there was no longer interest on the balances, every payment went 100% to the principal.
- He paid off the balances when the 0% rate expired.
*Find and compare all current credit card offers in our credit card directory [2].
Using a mortgage calculator, Joe determined that he saved over $20,000 in interest (at 6% over 15 years). Review current mortgage interest rates [3].
By using this strategy he was very focused on paying off the debt. Joe adds:
I think it helps you reach your goal quicker (paying off the mortgage) by giving you a set amount that needs to be paid off in a set amount of time…. If you don’t pay the credit cards off by the ‘deadline’, you’ll owe a large amount of interest.
Mortgage Payoff Tips
Extracting the money. When Joe used this strategy, he actually paid off his Countrywide mortgage with a Countrywide credit card (nice one Joe!). Since most credit cards prohibit paying off a loan at the same company, you can use the ways to extract money from balance transfers [4] for ideas.
What about taxes? For those who want to argue with Joe about giving up his mortgage interest deduction, don’t worry he did the math for his situation. Joe found that when he carried his mortgage, he was only able to itemize [5] about $14,000 per year, or $2,600 above the standard deduction [6] in 2010, which meant he would save only $650 in taxes in 2010, much less than the amount of interest he was paying.
Remaining balance. Since Joe was able to eliminate a large portion of the mortgage balance with this strategy, he was also able to payoff the remainder much faster; more money was going to principal instead of interest with each remaining payment.
Available cards. If you are considering something similar, you can use the current credit card offers in our credit card directory [2] at 0% to replicate Joe’s strategy.
More on Joe
Obviously, Joe has a lot of discipline when it comes to money. Here’s more on his background, spending habits, and credit card use now that he is debt free:
I don’t play credit cards much more or try to use 0% deals to my advantage. My identity was stolen in 2010, so I’ve tried to cut back on doing credit card deals. I did that Sapphire deal under my wife’s name…. We use two credit cards currently for rewards, and that’s it. Pay them off each month. We don’t buy anything, unless we can afford it, including our 2010 Altima we paid cash for (salvage title, but it was a steal and no body damage). My goal is to pay cash (or put on credit card and pay off every month) for everything from here on out – no more loans, whether it be a home, car or any other big ticket item.
Final Thoughts
Joe shares his final thoughts:
You should not employ this strategy unless you can guarantee you can pay off the balance transfers before the interest starts up (either by free cash flow every month or by investments you could liquidate if you got into a bind, like losing your job). If you cannot guarantee that, it likely is not worth the risk.
Thanks Joe, for sharing your story! It’s such a great one and I hope it inspires readers to think outside the box when it comes to personal finance!
Do you have a creative personal finance story you’d like to share? Let us know!