Author Topic: convenience check to pay off mortgage?  (Read 3407 times)

DoNorth

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convenience check to pay off mortgage?
« on: January 02, 2015, 07:13:48 AM »
I have $26,000 left on my mortgage note (30 years @5.75%).  It was originally a vacation home purchase (hence the larger interest rate), but I'm downsizing from DC and moving up north to begin FIRE within the next 12 months.  We began aggressively paying it down after I started reading MMM so in August/September, the balance was ~$75K.  This year, I maxed out my Roth @$5500, TSP around $17000, both kids VA 529s at $4000 each and I'm finalizing wife's solo 401K contributions so that will be maxed at $17,500 + about $7000 for the employer contribution portion and to her traditional IRA @$5500 (although I'm not sure if she will get a deduction based on our income.)

Anyway, we had some really good momentum going paying down the mortgage...much of it is probably mental, but the interest rate is also high compared to today's rates and I have to carry a mandatory insurance policy which is also high because it's a vacation place ($700/year).  Because we're topping off all the IRA's and 529's, the normal excess disposable income we have of $10K+/month won't be available to apply to the mortgage in Jan/Feb and March

 The other day I received a USAA convenience check....1.9% interest until January 2016 with 3% or $75 balance transfer fee (whichever is LESS (somewhat unusual, but USAA is pretty good like that) up to 95% of my credit card limit which is $27K. So I figured I could pay off the note with the convenience checks and even it took me a year; the total between CC interest and balance transfer fee (about $340) would still be less than interest from note + the mandatory insurance policy which I intend to drop.  Also, I don't like escrowing taxes so it would be nice to have that money available as well.  Has anyone ever done this?  What are negative effects?  Temporary hit to credit?  I'm very discplined about debt so don't have any hesitation and don't mind if my credit score takes a hit because I don't intend to borrow money for another mortgage or anything else like that.

RootofGood

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Re: convenience check to pay off mortgage?
« Reply #1 on: January 02, 2015, 07:49:11 AM »
I bought our current house partially with convenience checks.  $20,000 IIRC fixed at 2.99% back in 2003. 

I'm thinking about paying off our current 5 year mortgage (with 2 years remaining) with a convenience check.  I saw Chase Slate card has a 0% balance transfer offer with no transaction fees.  I might save $500 in interest. 

The only real risk would be a slight ding on your credit report for high utilization % if you come close to using the full credit line, and if you miss a payment, your 0% rate resets to the regular BT APR.  Who needs a high credit score anyway?  And just set up auto payments and you'll never miss a payment. 


ken

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Re: convenience check to pay off mortgage?
« Reply #2 on: January 02, 2015, 08:17:56 AM »
This great deal is subsidized by those who lack the discipline and will get caught with high interest rates later. It sounds like you have your situation under control and will payoff the balance as required. Go for it. This is your gain!

RootofGood

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Re: convenience check to pay off mortgage?
« Reply #3 on: January 02, 2015, 08:39:52 AM »
good to know--the chase offer is definitely ideal, but I already have their card and the cap is $15K.  I could always have my wife open separate slate account I suppose.  I enjoy reading your blog--keep it up.

Thanks, glad you are enjoying the blog! 

Is the $15k a hard cap or just your current credit limit?

frugaliknowit

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Re: convenience check to pay off mortgage?
« Reply #4 on: January 02, 2015, 09:57:08 AM »
The downside I see is if you had an interruption in income and couldn't pay it all off within a year, then the interest rate reverts to XX%.  How adequate are your cash reserves?