Creative idea for reducing mortgage interest

[Mariah Jeffery]

I'm constantly getting those 0% interest balance transfer checks from my credit card company. Most of the time they have a balance transfer fee of 3%, but my husband and I just each received a targeted offer with no fee.

Our highest mortgage rate is 6.75% and it's a simple interest mortgage, meaning interest is calculated daily. The mortgages are through a credit union so we have a lot of flexibility with paying early.

Between my husband and myself, we can take out about $45K on 0% interest and have to pay it back in 1 year. Our mortgage payments with this credit union are about $4K/month. Here is what I'm thinking we'll do.

1. Write the balance transfer checks to ourselves and cash them in our checking account with the credit union.
2. Have the credit union apply $44K, which is 11 months of mortgage payments at $4K/month, to our mortgage and have them suspend payments for the next 11 months.
3. Use the money we would have paid toward our mortgage to pay off the 0% credit card balance.
4. Profit. $44K * 6.75% * 11/12 = $2,722.50 in interest saved.

After coming up with this plan, I realized we could still profit from the offers with the 3% balance transfer fee given that our interest rate is 6.75%. The downside is our credit scores might take a temporary hit, but they're in the 790's now so we should be ok. We're about to buy 8 houses so I don't think we'll buy any more for at least 6 months.

Am I missing anything?

[Bryan Hancock]

I have seen other financial blogs where people do things like this all of the time. The real risk is not living up to the terms of the agreement for the free money. If you are one day late on a payment or their servicing agent "loses" the payment you can get hit with a lot of pain per the agreements. I would check that all out very thoroughly before you proceed.

If that checks out there doesn't seem to be anything wrong with your plan from what I see.