Author Topic: Paying off mortgage early by using a credit card?!  (Read 3460 times)

whitedragon

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Paying off mortgage early by using a credit card?!
« on: September 20, 2018, 09:36:08 PM »
So, one of my friends directed me to this video, and is fully on board:

https://www.youtube.com/watch?v=4GonTct2WMk

Apparently there are many videos like this, and they all seem to be working off the idea that paying your mortgage as early as you can up to the balance of your credit card can assist you to pay off the mortgage note faster.  The idea is that because you are paying more interest per payment up front (in the early amoritization schedule), it's misleading how much interest you are actually paying.

Maybe I'm not really understanding the concept, but this doesn't seem like doing anything other than using your credit card as a middle man at best, and potentially skyrocketing your high interest debt at worse.

Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

ysette9

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Re: Paying off mortgage early by using a credit card?!
« Reply #1 on: September 20, 2018, 09:44:18 PM »
My husband stumbled score a video like this and got my wondering as well. Then I heard about this https://truthinequity.com in some otherwise reputable podcast today. The idea is the same except you use a HLOC instead of a credit card. I can figure out how it is any different than just paying extra on a mortgage, but then maybe it is too complicated for my little brain. If someone can actually figure out how it works and whether it is nonsense as it feels, I’d appreciate the education.

ysette9

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Re: Paying off mortgage early by using a credit card?!
« Reply #2 on: September 20, 2018, 09:59:58 PM »
http://www.wallstreetphysician.com/debunking-mortgage-accelerator-program/

I still don’t really get it, but I think in part because there is nothing to get. You are paying off your mortgage early by putting extra money on it. You can do that in a complicated manner using HLOCs or credit cards or you can do it the simple way by just paying extra on it directly. The end result is the same and there is no free lunch.

I’ll stick with my 30-year and invest my extra $ instead, thankyouverymuch.

Timmm

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Re: Paying off mortgage early by using a credit card?!
« Reply #3 on: September 20, 2018, 10:19:38 PM »
This sounds a lot like mortgage/heloc payoff scams that I heard about around 10 years ago. There was a lot of online marketing and some of them put details up. It was a total fraud, they'd put "errors" in their comparisons like 13 monthly payments per year using their system. The core of the pitch seemed to be about how "mortgage interest is different" because early payments are mostly interest. Of course, there's nothing unusual or tricky about that, but it seems to confuse a lot of people.

At the time, there were opportunities to make a small profit, but it depended on continued access to a HELOC with interest and other fees no higher than your fixed mortgage interest. You'd draw your HELOC limit, put that all toward the mortage, and have your income directly deposited as payments on the heloc. As expenses came up, you'd pay with checks from the HELOC. The idea is your income is immediately reducing your debt, only coming back as needed. But at typical numbers, the potential gain was in the neighborhood of $10 per month, which is certainly not what the scammers were advertising.

They were charging a lot for software to manage the system, and also had referrals for helocs.

Telecaster

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Re: Paying off mortgage early by using a credit card?!
« Reply #4 on: September 20, 2018, 10:20:22 PM »
Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

You refute it by using math and common sense.

Here is the part where people get confused:     The scammers are correct.  If you borrow a bunch of money and put it on your mortgage right now, you in fact will cut years off the payment schedule.  But credit cards, HELOCs, and mortgages all calculate interest in the exact same way.  The difference is how the payment is calculated.  You only save money if the credit card or HELOC interest is less than the mortgage interest--which is almost never the case.

You can do the same thing as described in the video even faster by simply paying extra principle on the mortgage. 

slugline

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Re: Paying off mortgage early by using a credit card?!
« Reply #5 on: September 21, 2018, 07:40:35 AM »
I've seen this video previously. As has been pointed out, there is no special magic to this. It's just another flavor of paying down extra mortgage principal. The line of credit for expenses is a tool to help you vacuum up every spare penny in your possession and send it there. Saving takes a back seat to the almighty goal of killing the mortgage.

If I remember correctly, the presenter keeps hammering home the idea that mortgages are "front loaded" with interest, right? Well, if you took 30 years to pay down a consumer line of credit, you better believe that process would look front loaded with interest too (and at a much higher rate)!

talltexan

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Re: Paying off mortgage early by using a credit card?!
« Reply #6 on: September 21, 2018, 08:35:38 AM »
The "float" at zero interest that you get from credit cards does give you something here. It depends on how your monthly expenses compare to your interest on your mortgage.

If you're a mustachian who bought a house within the last eight years, these should both be low. If one of these is not true, you might save some money doing this.

nereo

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Re: Paying off mortgage early by using a credit card?!
« Reply #7 on: September 21, 2018, 08:41:21 AM »
Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

You refute it by using math and common sense.


Yup - there's no free lunch. 

@whitedragon - if you wanted to really blow your friend's mind you could show him how paying off a low-rate fixed mortgage in lieu of saving more is generally a very bad proposition. That blows most people's minds, and many simply can't accept that putting an extra $500/mo towards tax-advantaged accounts is a much better idea than using that to pay down a fixed-rate mortgage.

Like most of these scams, it's designed to play on the emotions and status we tie with having debt and being independently wealthy.
« Last Edit: September 21, 2018, 08:50:51 AM by nereo »

erutio

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Re: Paying off mortgage early by using a credit card?!
« Reply #8 on: September 21, 2018, 08:49:41 AM »
Yeah, this is ridiculous.
Some people are just that bad at math.

If you have a low enough mortgage rate, the optimal will always be to not pay down faster. 

If you insist on paying it off faster, then acknowledge that it's not the optimal use of your money, and just make extra principal payments directly to your mortgage bank. 

neo von retorch

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Re: Paying off mortgage early by using a credit card?!
« Reply #9 on: September 21, 2018, 08:59:59 AM »
:)

OK so I've got a 30-year mortgage of $100,000 @ 3.92% and my payment is $473. Ain't nobody got time for a mortgage payment. Not to mention, over 30 years, I'd pay $69,800 in interest!

However, I've just learned that I have a credit limit of $100,000 on my credit card (@ 18%)! Paid off my entire mortgage, which means I don't have a mortgage payment any more. Amazing!!!!!

Oh, one more thing... my new credit card minimum payment is $2500. (I'll pay it off in just 571 months - almost 48 years and pay a total of $149,423 in interest.)

It's up to the reader to calculate the opportunity cost on over $2000/month that could be invested in the stock market for 30+ years. Anyone?
« Last Edit: September 21, 2018, 09:01:43 AM by neo von retorch »

MilesTeg

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Re: Paying off mortgage early by using a credit card?!
« Reply #10 on: September 21, 2018, 10:21:32 AM »
So, one of my friends directed me to this video, and is fully on board:

https://www.youtube.com/watch?v=4GonTct2WMk

Apparently there are many videos like this, and they all seem to be working off the idea that paying your mortgage as early as you can up to the balance of your credit card can assist you to pay off the mortgage note faster.  The idea is that because you are paying more interest per payment up front (in the early amoritization schedule), it's misleading how much interest you are actually paying.

Maybe I'm not really understanding the concept, but this doesn't seem like doing anything other than using your credit card as a middle man at best, and potentially skyrocketing your high interest debt at worse.

Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

Banks won't take credit cards for mortgage payments, so you'd have to get a cash advance (or play some really silly games). Most cards I've seen have a really, really high cash advance rate (even if the purchase rate is low) and always charge at least one month's interest even if you replace the funds the same day (cash advance fees are not given a grace period like normal purchases). So, if you are putting extra money from your credit card into your mortgage you will end up paying a lot more unless you find a card with much better terms on cash advances.

Spoonsor

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Re: Paying off mortgage early by using a credit card?!
« Reply #11 on: September 21, 2018, 02:02:53 PM »
TLDR; Pay down high interest debt first, don’t keep too much in your savings account, and invest instead (in your mortgage or stocks, either is fine)

I also think the following video is a worthwhile example to see how easy it is to trick people by complicating things a bit, and leading their attention. If you take a simple concept, inject a bunch of complexity, it's easy to confuse people:

https://www.youtube.com/watch?v=4ZpUjcLJEqw
At first, everything seems sound, but you know that -20 = -20 and 0 =/= 1, so something broke down amid all the complexity.
Answer:
Spoiler: show
sqrt(x^2) = |x|


(As an aside, there are plenty of nitpicky things to call out (never mentions taxes, assumes you can use a credit card for a mortgage payment, among others), but I think we’re better off focusing on the meat of the video, case study style.)

On to our video. Assets and liabilities. Lets summarize these.

Assets: Home 250,000 (Obviously we put 20% down, right? Right?)
            Saving         0
            Car    ???

Liabilities: Mortgage 200,000 @ 6%
                Credit Card 12,000 @ 21%
                Car Loan     ??? @ ??% (but 600/mo, can't be caught riding around in a beater, obv)

She's going to give us a lot of details, but neglect to give us other important details. There’s also a false dichotomy in here. She presents two scenarios: 6% and 21%. Then she's goes on to prove that we’d rather pay 21%. Our bullshit radar is, hopefully, blaring sirens at this point. So let's look at the two cases she presents.

Case 1 monthly:
Income 5000
Mortgage 1200
Credit 600
Car 600
Other 1200
Saving 1400

So we assume perfect conditions for this, and spend our cash this way for 4 years. Cool, let's break that down. The 950/250 constant principal/interest split isn't quite accurate, but simplifies numbers, and is close enough. OK, so 12k paid to principle over 4 years, 45,600 to interest. Is that the end of the story here? No. You're also paying interest on your credit card and some is going to reduce your principal. In fact, after 25ish months of paying your credit card at 600/mo, you're free and clear! All gone! You can now save that 600 as well, so the last 23 months, you're now saving 2000/mo instead of 1400. Great! Where am I at now, 4 years down the road with assets/liabilities?

Assets: Home 250,000 (Assuming no appreciation/depreciation)
            Saving 81,000 (1400*25 + 2000 * 23, remember how we paid off that CC and saved it?)
            Car     Probably paid off, gotta be worth something

Liabilities: Mortgage 188,000 (Darn thing won't go down!)
                CC                   0  (Hooray diligently paying down a CC!)
                Car                  0  (If I've paid 48*$600 = $28,800 for a car, it better be paid off by now...)

So the dust settles, where are we? Well, our income is $5k, our expenses are now 2400 (we cut out the CC and car over the past 4 years, she forgot to mention that). And what's that sitting in my bank account? 81,000 bucks? She forgot to mention that too! What gives? She had some nice advice though, don't let that much capital rot in your bank! Pay down that mortgage, or invest in stocks!

So to summarize: $2,600 net positive monthly cashflow, assets of $331,000, and liabilities of $188,000. Not bad. Just go invest that savings somewhere!

Net worth: 331,000-188,000 = 143,000

Case 2 monthly:
Income 5000
Mortgage 1200
Credit 2000
Car 600
Other 1200

Things are going to get weird now. We'll stop saving any money. We're going to pay off our credit card debt of $12,000 as fast as we can (aka redirect saving dollars to pay it down), and then run out and get a cash advance somehow of $12,000 more when we've paid it off. Rinse and repeat for 4 years. I'll make the same car-related assumption as above (pay the car payment for the full 4 years, at the end of which it's paid off.)

So now, we're paying $2,000 to the credit card each month. She cites 6 months as the payoff time, but that's assuming 0 interest. Well we're assuming 21%, so I'll just fix that for her here. After 6 months, we still owe $792 and paid off $12,000. So lets re-up that credit card to $12,000 by getting a cash advance of $11,208, and paying down our mortgage principal, as suggested.

This mortgage calculating gets a bit complicated, but that's where spreadsheets come in! We need a normal mortgage calculator spreadsheet, and to add in a principal payoff every 6 months of 11,208. So making our 1200 a month mortgage payment, and adding this payment will eventually leave us with (if someone wanted to check my work here, go for it!):

Assets: Home 250,000 (Assuming no appreciation/depreciation)
            Saving         0
            Car     Same as above

Liabilities: Mortgage 101,000
                CC                   0
                Car                  0  (Same as above)

Net worth: 250,000 – 101,000 = 149,000

Wow! She's right! Her way is best! Right? Well, insofar as case 2 is better than case 1. Rats. But to assume these are our only options would be a false dichotomy. Let's try case 3. Let's pay down the CC ASAP, by using what we would have saved. Once we've paid that off, let's then dump any extra cash into the mortgage straight away each month.

Case 3:
Income 5000
Mortgage 1200
Credit 2000
Car 600
Other 1200

After a little over 7 months, we’ve more than cleared that pesky CC debt and can go whole hog into the mortgage. 3200/month. Nice. Do this for the remainder of our 4 years. Nice and simple. Where do we end up?

Assets: Home 250,000 (Assuming no appreciation/depreciation)
            Saving         0
            Car     Same as above

Liabilities: Mortgage 97,500
                CC                   0
                Car                  0  (Same as above)

Net worth: 250,000 - 97,500 = 152,500

The only thing to learn from her original video is to not just let your money waste away earning 0%. Stay away from the (for lack of a better term) credit card debt rollercoaster she described here. Just keep it simple. Pay down consumer debt, highest interest first. Then invest in stocks/bonds/real estate/whatever.

Hope I haven't confused the issue further.

ysette9

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Re: Paying off mortgage early by using a credit card?!
« Reply #12 on: September 21, 2018, 03:16:34 PM »
Excellent analysis. Thank you for breaking it down.

whitedragon

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Re: Paying off mortgage early by using a credit card?!
« Reply #13 on: September 24, 2018, 09:13:27 AM »
Thanks everybody, I was thinking I was going crazy.

Basically, if you funnel all your money into your mortgage it can't help but go down, but using a credit card seems extremely risky if your income isn't secure.

Also, @Spoonsor, your breakdowns were helpful, but in each of your scenarios you're assuming an initial 12K against your mortgage through your credit card. 

Why would you even start with that in the first place is the part I can't wrap my head around.  Why not just pay your mortgage, and then save/invest all the rest of your available cash (in say VTSAX) or whatever, and then at some point in the future you could potentially pay off the mortgage if that is still important to you.

This gets into the whole "payoff" vs "hold" your mortgage a little bit, but I don't understand the mentality that thinks its ok to add more unsecured debt to get out of secured debt.

neo von retorch

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Re: Paying off mortgage early by using a credit card?!
« Reply #14 on: September 24, 2018, 11:18:59 AM »
Was my example illustrative of just how bad it is to pay off low interest debt with high interest debt?

The only counter-example would be... paying off a mortgage on a credit card you pay off in full each month. Technically this would give you ~40 days of interest free loans the whole time. (And this also assumes you find a way to pay a mortgage with a credit card that doesn't incur some other kind of fee.)

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Re: Paying off mortgage early by using a credit card?!
« Reply #15 on: September 24, 2018, 11:40:43 AM »
Was my example illustrative of just how bad it is to pay off low interest debt with high interest debt?

The only counter-example would be... paying off a mortgage on a credit card you pay off in full each month. Technically this would give you ~40 days of interest free loans the whole time. (And this also assumes you find a way to pay a mortgage with a credit card that doesn't incur some other kind of fee.)

Maybe if a person had a cash-back credit card and had a way of using it to make an extra payment toward mortgage principal each month, then paid it off at the end of the month (instead of just putting the extra money toward the mortgage).

MilesTeg

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Re: Paying off mortgage early by using a credit card?!
« Reply #16 on: September 24, 2018, 12:51:22 PM »
Was my example illustrative of just how bad it is to pay off low interest debt with high interest debt?

The only counter-example would be... paying off a mortgage on a credit card you pay off in full each month. Technically this would give you ~40 days of interest free loans the whole time. (And this also assumes you find a way to pay a mortgage with a credit card that doesn't incur some other kind of fee.)

Maybe if a person had a cash-back credit card and had a way of using it to make an extra payment toward mortgage principal each month, then paid it off at the end of the month (instead of just putting the extra money toward the mortgage).

Cash back cards typically charge at least one month's interest for any cash advance, regardless of when you pay back the money. So if you get a cash advance to pay more toward your mortgage every month, you've effectively paying the yearly interest rate of your card's cash advance rate (typically higher than the normal purchase rate. My card, for example, is a 24% cash rate, so... I could pay my 3.5% mortgage down with money borrowed at 24%, hah.

I assume the minimum fee is put there specifically to avoid this type of attempted shenanigan.

TheGrimSqueaker

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Re: Paying off mortgage early by using a credit card?!
« Reply #17 on: September 24, 2018, 03:23:37 PM »
Was my example illustrative of just how bad it is to pay off low interest debt with high interest debt?

The only counter-example would be... paying off a mortgage on a credit card you pay off in full each month. Technically this would give you ~40 days of interest free loans the whole time. (And this also assumes you find a way to pay a mortgage with a credit card that doesn't incur some other kind of fee.)

Maybe if a person had a cash-back credit card and had a way of using it to make an extra payment toward mortgage principal each month, then paid it off at the end of the month (instead of just putting the extra money toward the mortgage).

Cash back cards typically charge at least one month's interest for any cash advance, regardless of when you pay back the money. So if you get a cash advance to pay more toward your mortgage every month, you've effectively paying the yearly interest rate of your card's cash advance rate (typically higher than the normal purchase rate. My card, for example, is a 24% cash rate, so... I could pay my 3.5% mortgage down with money borrowed at 24%, hah.

I assume the minimum fee is put there specifically to avoid this type of attempted shenanigan.

When I said "cash back", I wasn't talking about the cash advance which always triggers a fee. I'm talking about the kind of card that pays you a percentage of each transaction. The only difficulty I see is how to get a mortgage payment made with a card.

Spoonsor

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Re: Paying off mortgage early by using a credit card?!
« Reply #18 on: October 02, 2018, 07:33:13 AM »
Quote
Also, @Spoonsor, your breakdowns were helpful, but in each of your scenarios you're assuming an initial 12K against your mortgage through your credit card.

I think her initial premise was that you already had 12k in credit card debt, so I was just trying to work within her framework.

Quote
Why would you even start with that in the first place is the part I can't wrap my head around.  Why not just pay your mortgage, and then save/invest all the rest of your available cash (in say VTSAX) or whatever, and then at some point in the future you could potentially pay off the mortgage if that is still important to you.

Agreed! Do that! I don't know if she knows this and is trying to gain something from the video (followers? subscribers? some product her company sells to simplify the confusion she is creating?), or if she is well-intentioned and lost in all the math.

kms

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Re: Paying off mortgage early by using a credit card?!
« Reply #19 on: October 17, 2018, 02:23:40 PM »
As a computer scientist and avid mathematician I have to say that it was actually painful for me to watch this video. Not only is her math completely wrong, she's also using using a very misleading premise: if you don't use "the system" you'll end up refinancing your home every four years anyway. And let me get one thing straight: yes, it does look like 6%. The A in APR stands for annual, not for a random unspecified amount of time. And unfortunately, 6% of $200,000 are $12,000 and add up to $48,000 over the course of four years (massively oversimplifying here).

With that out of the way there are several factors she did not mention. My guess is these were omitted to make "the system" look good on paper.

First, the APR on the credit card for cash advances. It's usually somewhere in the vicinity of 25-30%, which is a HECK lot more than 6%.
Second, the fee a bank will charge for cash advances, which is 3% for American Express for example.
Third, the fact that your credit score will in fact DROP instead of RISING due to the regular cash advances on your credit card(s).
Fourth, as Spoonsor has shown very nicely the fact that by simply paying off the credit card, then putting that extra payment towards your principal each and every month you actually end up paying back much more than with "the system".

All things considered this looks like a dumb idea for stupid people who think that 26% is lower than 6% and who believe random people on the internet when they compare Fahrenheit and Celsius to APR.

simplyjay

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Re: Paying off mortgage early by using a credit card?!
« Reply #20 on: October 20, 2018, 06:02:14 PM »
Yeah, this is ridiculous.
Some people are just that bad at math.

If you have a low enough mortgage rate, the optimal will always be to not pay down faster. 

If you insist on paying it off faster, then acknowledge that it's not the optimal use of your money, and just make extra principal payments directly to your mortgage bank.


nothing like peace of mind. its a psychological mental and literally spiritual thing to be out of debt. this is why im paying my mortgage down aggressively.. plus its only for 5 years and its done.

nereo

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Re: Paying off mortgage early by using a credit card?!
« Reply #21 on: October 22, 2018, 08:08:30 AM »
Yeah, this is ridiculous.
Some people are just that bad at math.

If you have a low enough mortgage rate, the optimal will always be to not pay down faster. 

If you insist on paying it off faster, then acknowledge that it's not the optimal use of your money, and just make extra principal payments directly to your mortgage bank.


nothing like peace of mind. its a psychological mental and literally spiritual thing to be out of debt. this is why im paying my mortgage down aggressively.. plus its only for 5 years and its done.

I know that for some there is a psychological boost in not holding onto a mortgage, but it's not universal. One of the biggest financial mistakes I made was when I succumbed to pressure to use savings to pay off some low-interest debt.  The result was that, yes - I had less debt, but I also had far less savings and lost a tax deduction to boot.  The opportunity cost has proven to be substantial as well. With a fixed-rate mortgage in the US you are losing a definite inflation hedge, and a potential tax deduction and likely loss of tax-advantaged investments in exchange for a reduced cash flow and lower savings.  It also skews your NW towards a larger holding in an illiquid asset with lower growth potential.

I would much rather have a few hundred thousand$ more in the bank and plump tax-deferred accounts than to have no debt and fewer savings.  Psychologically, what lets me sleep at night isn't a lack of debt, but a surplus of savings. YMMV.

*(in memory of B42)
« Last Edit: October 22, 2018, 08:51:04 AM by nereo »

RWD

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Re: Paying off mortgage early by using a credit card?!
« Reply #22 on: October 22, 2018, 08:30:56 AM »
Yeah, this is ridiculous.
Some people are just that bad at math.

If you have a low enough mortgage rate, the optimal will always be to not pay down faster. 

If you insist on paying it off faster, then acknowledge that it's not the optimal use of your money, and just make extra principal payments directly to your mortgage bank.

nothing like peace of mind. its a psychological mental and literally spiritual thing to be out of debt. this is why im paying my mortgage down aggressively.. plus its only for 5 years and its done.

Peace of mind is having so much invested that you could continue to make your mortgage payment for years even if the stock market dropped 50%. That's where we are at now and if we had paid off our mortgage instead we would be worried about losing our jobs and not being able to pay the real estate tax, insurance, and maintenance on the property.

Bird In Hand

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Re: Paying off mortgage early by using a credit card?!
« Reply #23 on: October 22, 2018, 09:53:09 AM »
Peace of mind is having so much invested that you could continue to make your mortgage payment for years even if the stock market dropped 50%. That's where we are at now and if we had paid off our mortgage instead we would be worried about losing our jobs and not being able to pay the real estate tax, insurance, and maintenance on the property.

I can definitely understand why that would bring you peace of mind.

Peace of mind for us is already being barebones FI, and having low enough expenses (including paid off mortgage...soon) that we can easily afford to work part time at stable jobs we like, all while padding the stash and not worrying about having to draw it down during a bear market to pay the mortgage.  Oh, and having a larger balance in taxable investments than our remaining mortgage balance doesn't hurt either.  :)

freedomfightergal

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Re: Paying off mortgage early by using a credit card?!
« Reply #24 on: December 03, 2018, 11:13:08 AM »
I've been wondering about this.  I have a credit card with zero interest for 12 months.  The idea appeals to me because in Australia they have what is called a "Mortgage Offset" account.  Basically the idea is that any cash you have lying around is in the account and "offsets" the interest for that amount of Principal of your mortgage.  I was 'gobsmacked' that the modern US does not have the same type of account!  But you can set up a HELOC to act as an "offset account" by making a Principal payment from your HELOC and putting all your paycheck and cash in your HELOC which is calculated on the daily used amount (or monthly average, still working out the details), but the concept is that you reduce your interest in short term amounts.  I'm buying a house now with a small mortgage and plan to try this using a HELOC and an interest free credit card.  I'll update how it works.  The key thing is to be disciplined and not go crazy using up all the extra debt you can dig yourself into a huge debt-hole.

PrairieBeardstache

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Re: Paying off mortgage early by using a credit card?!
« Reply #25 on: December 03, 2018, 11:38:47 AM »
I've been wondering about this.  I have a credit card with zero interest for 12 months.  The idea appeals to me because in Australia they have what is called a "Mortgage Offset" account.  Basically the idea is that any cash you have lying around is in the account and "offsets" the interest for that amount of Principal of your mortgage.  I was 'gobsmacked' that the modern US does not have the same type of account!  But you can set up a HELOC to act as an "offset account" by making a Principal payment from your HELOC and putting all your paycheck and cash in your HELOC which is calculated on the daily used amount (or monthly average, still working out the details), but the concept is that you reduce your interest in short term amounts.  I'm buying a house now with a small mortgage and plan to try this using a HELOC and an interest free credit card.  I'll update how it works.  The key thing is to be disciplined and not go crazy using up all the extra debt you can dig yourself into a huge debt-hole.

That is a brilliant account. The US allows you to offset the interest paid with taxes. Similar-ish. I'd much prefer the account you're describing that Australia has. In Canada we get... nothing (at least as far as I'm aware but I've avoided buying a house because it doesn't seem financially beneficial). If I'm wrong on that, I'd love to hear about it.