Because Simply Paying for It Would Be Boring
June 16, 2006 7:21 AM Subscribe
Loaning myself some money. I'll try to keep the details inside to not bore the scanners, but how do I pay a roofer with a credit card when he doesn't take credit cards?
I realize this sounds like shady/ shitty finance-filter, but it's not (he hoped). We bought a house late last year and it needs a new roof. We can get a 2nd mortgage to finance it, but it requires refinancing our entire current 2nd mortgage (took two at purchase to avoid paying points on one larger mortgage). The current 2nd is at 7.75% for 15 years (~174 months remaining) whereas the new 2nd would be about $13k higher at 8.25%.
We've selected a roofing contractor and gotten a quote for $10,600[1]. If I take out the new 2nd mortgage, I'd wind up paying about $20,000 for the roof after 15 years of interest[2]. So no thanks. We have available credit to pay for the roof, but the roofer (understandably) does not accept credit cards. How do I make this happen without taking that loan?
The one idea that springs to mind is to pay with one of those "convenience" checks from the credit card provider that conveniently has a huge interest rate on it. And then transfer the entire nut to a new credit card on one of those 0/low interest rates on balance transfers offers. But that seems filthy dirty. Not that I would lay awake worrying about the poor credit card folks. My wife has suggested one of us Paypal'ing the other, but I assume that would get red flagged by the credit card company and wind up looking like taxable income to the IRS.
[1] It's not the most fun you could have as a roofer, thus the cost. One of the other estimates was more than twice as high.
[2] Admittedly not adjusted to real dollars, but you get the idea.
I realize this sounds like shady/ shitty finance-filter, but it's not (he hoped). We bought a house late last year and it needs a new roof. We can get a 2nd mortgage to finance it, but it requires refinancing our entire current 2nd mortgage (took two at purchase to avoid paying points on one larger mortgage). The current 2nd is at 7.75% for 15 years (~174 months remaining) whereas the new 2nd would be about $13k higher at 8.25%.
We've selected a roofing contractor and gotten a quote for $10,600[1]. If I take out the new 2nd mortgage, I'd wind up paying about $20,000 for the roof after 15 years of interest[2]. So no thanks. We have available credit to pay for the roof, but the roofer (understandably) does not accept credit cards. How do I make this happen without taking that loan?
The one idea that springs to mind is to pay with one of those "convenience" checks from the credit card provider that conveniently has a huge interest rate on it. And then transfer the entire nut to a new credit card on one of those 0/low interest rates on balance transfers offers. But that seems filthy dirty. Not that I would lay awake worrying about the poor credit card folks. My wife has suggested one of us Paypal'ing the other, but I assume that would get red flagged by the credit card company and wind up looking like taxable income to the IRS.
[1] It's not the most fun you could have as a roofer, thus the cost. One of the other estimates was more than twice as high.
[2] Admittedly not adjusted to real dollars, but you get the idea.
I've received convenience checks from my credit card companies that have no additional fees or rates above using the card normally. You can always try asking your credit card company if they'd be willing to send you no fee checks.
I don't understand why you would feel wrong about doing a balance transfer? The downside to that is that you'd have more credit open and a newer average account age, which dings your credit score slightly.
posted by skynxnex at 7:28 AM on June 16, 2006
I don't understand why you would feel wrong about doing a balance transfer? The downside to that is that you'd have more credit open and a newer average account age, which dings your credit score slightly.
posted by skynxnex at 7:28 AM on June 16, 2006
Some information about "convenience checks" from credit card companies. (This was just the first thing that popped up from google)
posted by SeizeTheDay at 7:29 AM on June 16, 2006
posted by SeizeTheDay at 7:29 AM on June 16, 2006
Response by poster: could you not get a homeowner's line of credit from a bank?
Normally yes, but we just bought in December, so we have enough equity to finance two rounds at an arcade, assuming you stick to the quarter machines.
I don't understand why you would feel wrong about doing a balance transfer?
I don't either. It's ridiculous that I would. The Rube Goldberg nature of it feels distasteful, but it's the credit system we have and we've flipped them so many times I wouldn't start having problems now. It just came out. Like I was in therapy or something.
Turns out the nice people at Chase don't really know what will happen if we use the checks, but they do know it won't be treated as a cash advance. So we'll either get charged the regular rate (8%) after 6 months of no interest or we'll get charged 3.99%. Assuming I can nail that down, seems like it works.
posted by yerfatma at 7:37 AM on June 16, 2006
Normally yes, but we just bought in December, so we have enough equity to finance two rounds at an arcade, assuming you stick to the quarter machines.
I don't understand why you would feel wrong about doing a balance transfer?
I don't either. It's ridiculous that I would. The Rube Goldberg nature of it feels distasteful, but it's the credit system we have and we've flipped them so many times I wouldn't start having problems now. It just came out. Like I was in therapy or something.
Turns out the nice people at Chase don't really know what will happen if we use the checks, but they do know it won't be treated as a cash advance. So we'll either get charged the regular rate (8%) after 6 months of no interest or we'll get charged 3.99%. Assuming I can nail that down, seems like it works.
posted by yerfatma at 7:37 AM on June 16, 2006
I used one of those checks to pay 10K downpayment on a car, because of the 0% interest for a while, then paid that off when the months were up. There is nothing shady about it – they send those checks out and you're using them as intended.
posted by visual mechanic at 7:51 AM on June 16, 2006
posted by visual mechanic at 7:51 AM on June 16, 2006
Can you get a cash advance on the card that large, put it in your bank account and give the roofer a money order or cashier's check?
posted by misanthropicsarah at 8:42 AM on June 16, 2006
posted by misanthropicsarah at 8:42 AM on June 16, 2006
Have you asked the roofer if you can pay in installments?
posted by wryly at 8:52 AM on June 16, 2006
posted by wryly at 8:52 AM on June 16, 2006
Best answer: If you plan on swapping the credit to another card, make sure that you already have the new card ready to go (they sometimes take a long time to arrive after you apply), and that the new card will have a high enough limit. The limit on new cards is often less than $10k.
Moving the money through PayPal probably won't work, because most personal accounts have a $500 per month withdrawal limit. I think you have to pony up for one of their premium or business accounts to have that raised.
Another option: If you have a 401k, you can usually borrow half of your vested amount from yourself with no penalty. You pay interest on the loan, but that interest goes to your 401k as well, so you're still really just borrowing from yourself.
posted by el-gregorio at 9:01 AM on June 16, 2006
Moving the money through PayPal probably won't work, because most personal accounts have a $500 per month withdrawal limit. I think you have to pony up for one of their premium or business accounts to have that raised.
Another option: If you have a 401k, you can usually borrow half of your vested amount from yourself with no penalty. You pay interest on the loan, but that interest goes to your 401k as well, so you're still really just borrowing from yourself.
posted by el-gregorio at 9:01 AM on June 16, 2006
Best answer: The one idea that springs to mind is to pay with one of those "convenience" checks from the credit card provider that conveniently has a huge interest rate on it. And then transfer the entire nut to a new credit card on one of those 0/low interest rates on balance transfers offers. But that seems filthy dirty.
There's nothing filthy dirty about that. You should work their system to your advantage whenever possible. god knows they work every twist and turn they can imagine to their advantage!
Just be sure that you're totally clear on the terms.
The low- or no- interest on balance transfers will only be for a set period of time (example: mine is 6 months) and if you are late with a payment, they'll jack your rate up. These are the standard fine print catches. YMMV, so look @ yr cardholder agreement & call customer service for claification if you need it).
My credit card company offered me a temporary low rate on cash advances and balance transfers. The rate was even lower than my Line of Credit that I bought a car with. So I paid off the LOC with a convience cheque, and I'm making the payments with the balance accruing at the lower rate. A few weeks before the interest rates shoots up to my regular exorbiant rate, I'm going to pay off the credit card with my LOC. I was paying interest on that $ anyway, but this cuts my interest rate in half for half a year. Sounds good to me.
posted by raedyn at 9:02 AM on June 16, 2006
There's nothing filthy dirty about that. You should work their system to your advantage whenever possible. god knows they work every twist and turn they can imagine to their advantage!
Just be sure that you're totally clear on the terms.
The low- or no- interest on balance transfers will only be for a set period of time (example: mine is 6 months) and if you are late with a payment, they'll jack your rate up. These are the standard fine print catches. YMMV, so look @ yr cardholder agreement & call customer service for claification if you need it).
My credit card company offered me a temporary low rate on cash advances and balance transfers. The rate was even lower than my Line of Credit that I bought a car with. So I paid off the LOC with a convience cheque, and I'm making the payments with the balance accruing at the lower rate. A few weeks before the interest rates shoots up to my regular exorbiant rate, I'm going to pay off the credit card with my LOC. I was paying interest on that $ anyway, but this cuts my interest rate in half for half a year. Sounds good to me.
posted by raedyn at 9:02 AM on June 16, 2006
Response by poster: Yeah, the check seems like it'll work fine. Thanks everybody for reassuring me. Sorry if this seems like a waste of an AskMe.
posted by yerfatma at 10:01 AM on June 16, 2006
posted by yerfatma at 10:01 AM on June 16, 2006
I'm unclear about something, sorry. You can pay for the new roof with a refinanced 2nd mortgage, or with a credit card/convenience check-sort-of-thing? In my mind, the credit card option is likely to turn out much, much, much worse in the end.
Mortgage Option
Pro: payments can be stretched out to 15 year if necessary, or pulled in whenever you have available cash. Your choice, every month.
Con: 2nd mortgage interest is 0.5% higher than currently. If you never make extra payments, you will end up paying 2X roof cost at the end of the mortgage.
Credit Card Option
Pro: Lower interest for the first six months (approximately).
Con: You have very little schedule flexibility thereafter - you will have to pay most of the $10K off within six months. Otherwise you will end up with a huge credit card balance at high interest rates. If you have the occasional cash-poor month, the penalties will add to the interest rates, and things will get worse quickly.
Unless you are very certain of having $10K extra cash within six months, the credit card option is bad. Otherwise, the high credit card balance could easily mean you could end up paying 2X the $10K price within 3 years rather than in 15!
I would take the 2nd mortgage (and negotiate generous early payment options), and apply the payments you were planning for the credit card to the mortgage. That way, if you have one cash-poor month, you're not screwed. If you are religious about putting extra cash into the mortgage for the first few year, you'll be far away from the 2X outcome
(I don't want to get all gloomy-and-doomy on you, but if this were my own situation, I would equate the credit card option with an extremely high risk of losing the house due to a cash flow/interest downward spiral. But that may be just me.)
posted by mediaddict at 10:24 AM on June 16, 2006
Mortgage Option
Pro: payments can be stretched out to 15 year if necessary, or pulled in whenever you have available cash. Your choice, every month.
Con: 2nd mortgage interest is 0.5% higher than currently. If you never make extra payments, you will end up paying 2X roof cost at the end of the mortgage.
Credit Card Option
Pro: Lower interest for the first six months (approximately).
Con: You have very little schedule flexibility thereafter - you will have to pay most of the $10K off within six months. Otherwise you will end up with a huge credit card balance at high interest rates. If you have the occasional cash-poor month, the penalties will add to the interest rates, and things will get worse quickly.
Unless you are very certain of having $10K extra cash within six months, the credit card option is bad. Otherwise, the high credit card balance could easily mean you could end up paying 2X the $10K price within 3 years rather than in 15!
I would take the 2nd mortgage (and negotiate generous early payment options), and apply the payments you were planning for the credit card to the mortgage. That way, if you have one cash-poor month, you're not screwed. If you are religious about putting extra cash into the mortgage for the first few year, you'll be far away from the 2X outcome
(I don't want to get all gloomy-and-doomy on you, but if this were my own situation, I would equate the credit card option with an extremely high risk of losing the house due to a cash flow/interest downward spiral. But that may be just me.)
posted by mediaddict at 10:24 AM on June 16, 2006
Response by poster: To clarify: the 2nd mortgage option would mean refinancing our entire current second mortgage, plus the additional cash for the roof at half a point higher. Assuming we just make the normal payments on the second mortgage, this adds roughly $10,000 to the cost of the roof.
I think we'll be able to knock most or all of the $10k off the credit card in 6 months. However, if we don't, the rate on the credit card is 7.99%, which is still a quarter point lower than the new 2nd mortgage would be. While that rate is subject to change, we can always keep floating it on intro offers until it's paid off.
Speaking of paid off, this econ degree is finally starting to.
posted by yerfatma at 10:58 AM on June 16, 2006
I think we'll be able to knock most or all of the $10k off the credit card in 6 months. However, if we don't, the rate on the credit card is 7.99%, which is still a quarter point lower than the new 2nd mortgage would be. While that rate is subject to change, we can always keep floating it on intro offers until it's paid off.
Speaking of paid off, this econ degree is finally starting to.
posted by yerfatma at 10:58 AM on June 16, 2006
Sometimes your credit card company will have a promotional rate on convenience checks, if you call to get the convenience checks. (As opposed to useing the ones sent with your monthly statement.)
I actually used this to my advantage when I bought a car a few years ago by paying off that credit card first (and using a different one for day-to-days), then writing the convenience check, then taking a year to pay off the debt on it.
The key is that the lowest percentage rate items get paid off first, so if I had had ANY purchases sitting on that card, they would have accumulated monthly interest fees until I had paid off the convenience check.
posted by Sprout the Vulgarian at 11:12 AM on June 16, 2006
I actually used this to my advantage when I bought a car a few years ago by paying off that credit card first (and using a different one for day-to-days), then writing the convenience check, then taking a year to pay off the debt on it.
The key is that the lowest percentage rate items get paid off first, so if I had had ANY purchases sitting on that card, they would have accumulated monthly interest fees until I had paid off the convenience check.
posted by Sprout the Vulgarian at 11:12 AM on June 16, 2006
I don't know if this is covered in one of the links, but (having used a convenience check before) you should know that funds from the check are typically "not available" (to you, your bank, or the person you write the check to) for up to six weeks (mine took three). That may or may not mess up your plans on how you'll pay.
posted by dbmcd at 11:18 AM on June 16, 2006
posted by dbmcd at 11:18 AM on June 16, 2006
You can borrow unsecured money (credit card) for a lower rate than secured (mortgage)? Fundamentally-speaking, that is unusual.
I realized that the entire second mortgage needs to be refinanced, but I assume the term of the mortgage (as opposed to the amortization period) is only around 5 years (as an example). So, at 5 years, you have to renegotiate anyway and get the best rate you can. So the excess 0.5% interest you are concerned about, is only in excess for 5 years, not 15 years.
As always with finance, the devil is in the details, and I don't know the details, so I won't disagree with you. The "knock most or all of the $10k off in 6 months" detail certainly outweighs everything else in this decision.
posted by mediaddict at 11:20 AM on June 16, 2006
I realized that the entire second mortgage needs to be refinanced, but I assume the term of the mortgage (as opposed to the amortization period) is only around 5 years (as an example). So, at 5 years, you have to renegotiate anyway and get the best rate you can. So the excess 0.5% interest you are concerned about, is only in excess for 5 years, not 15 years.
As always with finance, the devil is in the details, and I don't know the details, so I won't disagree with you. The "knock most or all of the $10k off in 6 months" detail certainly outweighs everything else in this decision.
posted by mediaddict at 11:20 AM on June 16, 2006
I've received convenience checks from my credit card companies that have no additional fees or rates above using the card normally.
Those checks may be a little more convenient for the CC company than for you -- the ones that my CC company (which is a subprime lender) sends me have no grace period, unlike purchases on the card itself (caveat, I haven't looked closely at the terms lately). This means you would start paying interest right away instead of after a month. That is, they work more like cash advances, not credit card charges.
posted by advil at 11:44 AM on June 16, 2006
Those checks may be a little more convenient for the CC company than for you -- the ones that my CC company (which is a subprime lender) sends me have no grace period, unlike purchases on the card itself (caveat, I haven't looked closely at the terms lately). This means you would start paying interest right away instead of after a month. That is, they work more like cash advances, not credit card charges.
posted by advil at 11:44 AM on June 16, 2006
Response by poster: You can borrow unsecured money (credit card) for a lower rate than secured (mortgage)? Fundamentally-speaking, that is unusual.
I'm not sure it is unusual anymore. Which probably says something about the US credit card system (there was a pretty good Frontline a year or two ago on it). We have good credit, but very little home equity. I agree things look upside down, but here we are. Or are we here.
posted by yerfatma at 12:04 PM on June 16, 2006
I'm not sure it is unusual anymore. Which probably says something about the US credit card system (there was a pretty good Frontline a year or two ago on it). We have good credit, but very little home equity. I agree things look upside down, but here we are. Or are we here.
posted by yerfatma at 12:04 PM on June 16, 2006
While that rate is subject to change, we can always keep floating it on intro offers until it's paid off. -yerfatma
Do you mean that you'll keep signing up for new cards? Because that isn't a good idea (you probably know just, but just in case). It's alright to sign up for one new card, but if you do it repeatedly, a constant searching for new credit will hurt you score.
posted by raedyn at 12:10 PM on June 16, 2006
Do you mean that you'll keep signing up for new cards? Because that isn't a good idea (you probably know just, but just in case). It's alright to sign up for one new card, but if you do it repeatedly, a constant searching for new credit will hurt you score.
posted by raedyn at 12:10 PM on June 16, 2006
the ones that my CC company ... sends me have no grace period, unlike purchases on the card itself ... This means you would start paying interest right away instead of after a month. That is, they work more like cash advances, not credit card charges. - advil
Yep. Mine too. On both my cards (different CC companies & different banks). It's typical. But when you're carrying a balance you're already past the grace period and you would have been paying interest that whole time anyway, so you might as well do it at the lower rate.
posted by raedyn at 12:32 PM on June 16, 2006
Yep. Mine too. On both my cards (different CC companies & different banks). It's typical. But when you're carrying a balance you're already past the grace period and you would have been paying interest that whole time anyway, so you might as well do it at the lower rate.
posted by raedyn at 12:32 PM on June 16, 2006
This thread is closed to new comments.
posted by GuyZero at 7:27 AM on June 16, 2006