Paying The Mortgage With A Credit Card Topics:
These services charged fees for the convenience, and looking back, they were probably only offered because people couldnt keep up with their mortgage payments, and eventually their credit card payments either.
Chances are these same people had to execute a balance transfer shortly after
Unsurprisingly, these services seemed to disappear as quickly as they surfaced, but there are still options to pay the mortgage with a credit card each month free of charge, even if mortgage lenders wont let you do it directly.
Paying Your Mortgage With A Credit Card: Are There Risks
While I was able to find a workaround that let me pay off my mortgage without any fees, those deals are hard to come by in the real world. Most of the time, there are huge drawbacks that come with paying your mortgage with a credit card, and these drawbacks make using plastic to cover mortgage payments much riskier than it might seem.
If youre thinking of paying your mortgage with a credit card, some of the pitfalls to watch out for include:
Will My Debt Affect How Much I Can Borrow For My Mortgage
When affordability calculations are made, most lenders will presume that you can pay back around 3-5% of your credit card debt each month. They will consider the repayment amount on your credit card debt when they calculate how much you will be able to pay towards your mortgage each month.
The lender will want you to feel comfortable about being able to afford your mortgage payment each month. Therefore, if you have lots of credit card debt and your monthly expenses are high, your loan is likely to be smaller.
From the affordability calculations, they will work out your loan to income ratio. Your income will be multiplied by a certain amount to determine the amount to lend you. It can be multiplied up to a maximum of 4.5 times, so if your income is £25,000 then the maximum loan you could possibly obtain is £112,500.
Bear in mind that if you apply for your mortgage with another person, it can increase the amount you can borrow due to your joint income. However, if they are in debt too then this can negatively impact your application.
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Use A Credit Card Cash Advance
There are a couple of ways you can use your credit card to make a mortgage payment without involving a third party — but they’re all just as expensive, if not more. For example, you can use your credit card to pull cash out of the ATM. This can then be deposited into your bank account or used to purchase a money order.
In some, now rare, circumstances, you can even use a credit card to buy a money order directly. However, most retailers have stopped accepting credit cards for money order purchases due to fraud and money laundering concerns.
In any case, the transaction will be considered a . Unfortunately, cash advances have a lot of associated costs.
For one thing, you’ll pay a cash advance fee. This can be equal to 5% or more of the total you withdraw. Plus, cash advances start accruing interest as soon as they post, often at a higher interest rate than regular purchases. A don’t forget to double-check your cash advance limit — it will likely be much lower than your regular credit limit.
Besides the fees, you should avoid cash advances if your goal is to earn credit card rewards. Cash advances don’t earn purchase rewards at all. They also won’t count toward the spending requirement for a .
Paying With A Money Order
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What To Do If I Made A Late Newrez Mortgage Payment
Its a good idea to avoid a late NewRez Mortgage payment at all costs, but mistakes sometimes happen. While you dont want to be too hard on yourself if this happens, you need to consider possible consequences. Case in point: you could see your credit score take a hit if you dont make payments on schedule. Also keep in mind that a late NewRez Mortgage payment may remain on your credit report for as many as seven years, which would adversely impact your credit score. What follows is a look at 3 proven strategies you can use to have late mortgage payment information scrubbed from your credit report.
Other Ways To Get A Handle On Your Mortgage Payment
If youre tempted to pay your mortgage with a credit card because youre falling behind, there are better strategies for catching up on payments:
- Apply for forbearance. Mortgage forbearance can give you a temporary break from making your mortgage payments when you have a financial hardship.
- Get a loan modification. You may be able to work out a loan modification with your lender. Modifying your loan can result in a lower interest rate and/or longer loan term, thus reducing your monthly payment to a more affordable level.
- Reduce other housing expenses. To lower your property tax bill, consider challenging your property tax assessment if you can make a case that its too high. An easier way to reduce your monthly housing costs is to shop around for lower homeowners insurance rates or raise your deductible.
- Set up a repayment plan. A repayment plan can help you catch up on late mortgage payments when youre still able to make your current payments. One way to do this is by spreading out your past-due amount over several months to make it affordable.
- Refinance your mortgage. If you have a government-backed loan , it may be possible to refinance your mortgage even if you dont have the income and credit score normally needed to qualify for a new loan. If you dont have a government-backed loan, a conventional refinance could be an option, but these have stricter financial requirements. Refinancing also comes with closing costs.
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Buying A Home With Credit Card Debt
So, whats the bottom line for you as a home buyer if you carry credit card debt?
If you have a good credit score but worry that your total debt service is too high, use a mortgage qualifier calculator to identify your TDS value. If it exceeds 40%, you have a choice to make: you can look for a less expensive home, continue saving so you have a larger down payment, or pay down some debt to qualify for a bigger mortgage. If you choose to pay down debt, focus on the one with the highest interest ratewhich is often credit card debtto get the most bang for your buck.
Similarly, if your credit score is less than ideal because youve maxed out your credit cards or dont make your payments on time, your best bet is to start paying off that debt to improve your score before applying for a mortgage.
Here are few tips to begin paying off your credit card debt while shopping for a home:
Stop using your credit cards. Theres no sense in continuing to add to your debt while youre trying to pay it off, so stick to cash or debit until youve made a dent in your balance.
Go beyond the minimum. When you make only the minimum payments on your credit cards, very little of that money goes toward reducing your balanceits almost all interest. The more you can direct to your payments each month, the faster youll get out of debt.
How Can You Pay Your Mortgage With A Visa Or American Express Credit Card
While wed generally consider Plastiq the best way to pay your mortgage with a credit card, the service doesnt support mortgage payments made with Visa or American Express credit cards.
For many homeowners, thats an issue, and it doesnt seem to be an easy one to overcome. In very rare cases, your lender may allow credit card payments in general, which might let you use your Visa or Amex card. Otherwise, youll likely have to take an alternative avenue, like paying with a cash advance or purchasing prepaid gift cards via the manufactured spend method .
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Paying Off Our Mortgage With Plastiq
With $100,000 left on our mortgage balance and plenty of Plastiq referral dollars to pay the whole thing off, what could go wrong? Really, the only issue we had to tackle from there was which credit card to use or sign up for.
While there are many solid Discover and Mastercard credit cards that could be smart to use for this purpose, we ultimately decided to use a rewards credit card we already hadmy husbands Barclaycard Arrival Plus® World Elite Mastercard®.
We chose the Barclaycard Arrival Plus World Elite Mastercard because it earns 2X miles for each dollar you spend. On the redemption side, you can cash in your miles for any type of travel at a rate of 1 cent per point, providing your purchases are at least $100 or more.
Paying our mortgage through Plastiq was easy, but you do have to allow time for payments to post through the platform. Because payments from Plastiq to my old mortgage providerCaliber Home Loanscould take up to two weeks, I started the process by paying our mortgage payments one month ahead of time every month.
In the beginning, I tried to pay $3,000 to $4,000 per month toward our mortgage, which was a lot considering the minimum payment on our 15-year loan was around $1,500. A few times, I was able to pay considerably more than that in the $5,000 to $8,000 range. Because of the way mortgage interest accrues, every big payment I made resulted in a larger percentage of my monthly payment going toward the principal of my mortgage and not interest.
The Downside To These Methods
- The first thing you have to look at it is the associated fee for using a credit card
- You also have to make sure you arent charged cash advance fees for doing it
- Also consider the work involved if employing a creative method
- And the potential to accidentally miss a mortgage payment along the way
- It may also complicate a future refinance if payment history is shown via credit card
- In the end it might not be worth it
While its kind of cool to pay your mortgage with a credit card, it does require some work, as noted above. And if you have a jumbo mortgage payment, these methods may not work very well if your credit limits are low.
You certainly wont want to send partial payments and find out that your loan servicer paid down your principal or simply returned your check.
It can also get murky if you use different methods to pay the mortgage, and then decide to apply for a refinance because mortgage rates went down. If the new lender asks for mortgage payment history and sees some of the payments made via credit card, they may question your solvency. Even if you do explain yourself, they probably wont be thrilled about it.
At the end of the day, youll have to ask yourself how much youll really earn by using a credit card once factoring in your time going to the store to buy gift cards, not to mention the transaction fees and credit card annual fees.
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How To Pay Your Mortgage With A Credit Card
A third-party payment service like Plastiq facilitates mortgage payments with a Discover or Mastercard credit card. Visa and American Express dont currently allow mortgage payments through this service.
You pay Plastiq a fee equaling 2.85% of your mortgage payment every time you use your credit card. Plastiq then delivers an electronic payment if the lender accepts it, or it cuts the mortgage lender a check, eliminating the need for all three parties the mortgage lender, the credit card issuer and the credit card payment network to approve the transaction.
You can pay manually this way or set up automatic payments. You also have the option of making a one-time payment.
Ideally, you then turn around and immediately pay back your credit card for the amount of the mortgage payment plus processing fee. If you made the transaction with an eligible rewards credit card, you’ll earn rewards as you would with any other purchase.
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Paying Off Our Mortgage Earlywhat Did We Get
Paying a mortgage with a credit card isnt for everyone. In fact, many experts discourage it. Luckily for us, everything worked out. Making the final payment toward our mortgage was a euphoric feeling. We suddenly went from owing money on our home to owning it outright.
Were still required to pay property taxes and homeowners insurance, but its a nice feeling to no longer have mortgage payments to cover. We also earned an effective 3.75 percent on the money we prepaid since we saved that much in interest.
Along the way, we also earned 200,000 Barclays miles for paying off $100,000 in loan payments .
How did we spend our rewards? We paid for the bulk of an Adriatic cruise by cashing in 200,000 Barclays miles for $2,000 in travel credit. Our cruise departed out of Venice, Italy, with stops in Southern Italy, Greece and Croatia.
But the most important benefit we gained has nothing to do with money or rewards. The freedom we earned by paying off all our debt is a gift that we know will pay off the rest of our lives. No matter what happens, we have a home thats fully paid for one we cant lose due to market downturns or lean financial times.
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Option #: Write Them A Letter
The next option at your disposal is to write a letter, known as a goodwill letter, to NewRez. In the letter, youll want to specifically and respectfully request a removal. Do these 2 things in the letter:
- Demonstrate that you accept that the situation was caused by you.
- Guarantee that there will be no repeat of the delinquent behavior going forward.
What follows is a sample letter template you can use as inspiration:
To Whom It May Concern:
I appreciate your taking the time to read my letter. The reason for this correspondence is that I found on my latest credit report a late payment listed on for my account. Im aware of the importance of making timely payments and meeting my financial commitments. But due to , I unintentionally missed the payment due date. Although I missed the deadline, I have since then taken measures to ensure this does not happen again. Specifically, Ive . Since my missed payment, I have had a flawless record of making payments on time.
One reason Im making this request is that my intention is to apply for a , and Ive come to understand that the missed payment reflected on my credit report could jeopardize my objective. Given the fact that my single late payment does not adequately reflect my creditworthiness and intention to abide by my financial obligations, I would be grateful if you would make a goodwill adjustment. This would delete my late payment on and enable me to obtain a [loan, credit card, etc.) and to secure a better rate.
Is It Possible To Use A Credit Card To Pay A Mortgage
If youre highly motivated, its possible to pay your mortgage with a . However, you need to be willing to jump through some hoops, and you may find that its not worth it.
For starters, most mortgage lenders, including Rocket Mortgage®, dont offer the ability to make a payment directly to them with a credit card. The reasoning for this is that there are credit card processing fees. With something as high as a mortgage payment, that can really add up quickly. If the credit card fee is 3.5%, the fee on the mortgage payment in the example above is $45.70.
Because most mortgage originators sell the loans they make to major mortgage investors like Fannie Mae and Freddie Mac, if they service the loan, theyre obligated to make the entire principal and interest payment to the investor. In return, they do get paid a stipend by the investor for servicing the account, but it can be a very small amount.
Although credit card processing fees vary, if theyre giving you 1.5% cash back or rewards, for example, you know the processing fee must be higher than that, so it quickly could cause problems for mortgage lenders and servicers.
There are a couple of ways to pay a mortgage with your credit card depending on your credit card issuers policies and how persistent you are.
Get approved to buy a home.
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