Pros And Cons For Paying Your Mortgage With A Credit Card
Some credit cards offer cash back deals or attractive sign-up bonuses in exchange for spending a certain amount of money within the first few months of having the card.
Those kinds of points can earn you a vacation, says Benét Wilson, senior credit cards editor for The Points Guy. However, Wilson says you should evaluate the cost versus the benefit when deciding to use a rewards credit card to pay your mortgage just to earn points.
If you cant make your mortgage payment and need cash immediately, putting the balance on an existing credit card could be easier and quicker than a personal loan. But be careful you will be on the hook for high interest if youre unable to pay the bill in full and adding extra hundreds or thousands of dollars to your credit card bill each month. This could have consequences on your credit report.
Regularly putting rent or mortgage on a credit card and not paying the credit card balance will lead to much higher utilization, which will sink your credit score, Cagan says.
There are many components of a credit score beyond utilization, but its something to keep in mind. A lower credit score can lead to higher interest rates on future credit cards and loans.
Services To Pay Your Rent Or Mortgage With A Credit Card:
|American Express, Discover, Mastercard, Visa|
Some providers, including Venmo, require both landlords and tenants to register in order to use the service. None of the ones I have scanned have lower credit card fees than Plastiq, which is by far the most popular service. Plastiq will occasionally run promotions that cut down on this fee.
Pros Of Paying Your Mortgage With A Credit Card
Plastiq is a third-party service which allows you to pay your mortgage via credit card, which lenders generally dont allow. The benefit of this is that youll have more money on hand and be able to soften the heavy financial blow that mortgage payments often represent. Additionally, youll accumulate more interest by leaving cash in the bank, as well as greater credit card rewards & the ability to control when you pay.
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Monitor Your Credit Report And Score
It’s also a good idea to continually monitor your credit while you’re repaying your mortgage. If you have a good payment history and high credit score, you may be able to refinance your mortgage to lower your interest rate, decrease your monthly payment or get cash out. You can check your Experian credit report for free and monitoring.
To Pay Your Mortgage With Your Credit Card Look Into A Third
When it comes to paying your mortgage, using a credit card can sound like a good idea since you could rack up cash back, points or miles. Plus, instead of having to part with your hard earned cash immediately, you could instead shell out the dough when your credit card bill is due. Unfortunately, most mortgage providers dont allow credit card payments. Even if your provider does, youll usually have to pay processing fees if you use a credit card. But you do have a way to get around any restrictions: by using a third-party bill payment service. One way to avoid processing fees is to use a Visa or Mastercard branded credit card through the Paytm bill payment service.
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Taking A Hit On Your Credit
Paying your mortgage with your credit card will also increase your credit utilization ratio, which isnt good for your credit score. It means youre using a greater percentage of your available credit. Amounts owed is a major component of your , accounting for 30% of your score.
Your credit score may decline if you increase your credit utilization because the more credit you use, the more it looks like youre at risk of overextending yourself.
What To Watch Out For
The biggest concern is timing. When you pay with your credit card via a service, it takes time for the check to reach your provider.
Make sure you fill out all the correct information and schedule your payments early enough to account for the delivery delay. You don’t want to pay any late fees or penalties because of the mail.
A single late payment dinging your credit can throw all those credit points right out the window.
To avoid this, make sure the first payment you make is earlier than your due date. Just send a little test pre-payment to make sure it’s all processed properly. Better safe than sorry.
Go enjoy those points!
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Can I Use My Credit Card Before Closing On A House
And make sure you are not late on car, credit card or other outstanding debt payments from the time you begin house-hunting until you have closed. Paying your bills late will drop your FICO score, so it’s a good idea to avoid that scenario at any time, but especially when you are seeking to close on a mortgage loan.
Avoid Using A Cash Advance To Pay Your Mortgage
While you may be tempted to use a cash advance from your credit card to make your mortgage payment, make sure youre aware of the risks. When you use a cash advance, whether its an ATM withdrawal or convenience checks from your credit card issuers, youll be charged a cash advance fee.
Cash advance fees are often around $5 or 5% of the transaction amount. On a mortgage payment of $1,000, youd pay a $50 cash advance fee. Cash advances also are charged a higher interest rate and do not have a grace period. The lack of a grace period means your balance starts accruing interest right away rather than after your billing statement closing date.
Paying your mortgage with a check sent from your credit card issuer would be treated as a cash advance and would incur the same fees and interest.
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Should You Pay Bills With A Credit Card
There really isnât a set answer to whether you should pay your bills with a credit card. It depends whether the business allows it and if it makes sense for your situation. To help you decide, you can weigh the pros and cons, like whether youâll have to pay a fee and whether you can avoid interest charges. If you can do it responsibly, you might find that paying bills with a credit card is a good choice for you.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Why Pay For Your Mortgage With A Credit Card
While it is possible to pay for your mortgage with a credit card, why would you want to? After all, if you make your mortgage payments on time, its already improving your credit score without the need to pay with a card.
There are multiple reasons why someone might consider paying their mortgage with credit, so lets explore a few.
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What Are The Risks In Making Mortgage Payments With A Credit Card
While paying for your mortgage with a credit card can work for those looking to cash in on credit card rewards or avoid late fees, it can also be extremely risky and is not advisable for homeowners intending to use credit to postpone payments or avoid foreclosure. Before using a third-party service to pay with credit on your mortgage payment, consider the following:
Buying A Home When You Have 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 balance 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.
Stop using your credit cards. Theres no point in adding to your debt while youre trying to pay it off, so stick to cash or debit until youve made a dent on 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 balancethats almost all interest. The more money you can direct to your payments each month, the faster youll get out of debt.
This article is presented by CIBC Pace It, as part of the MoneySense guide to debt management.
This article was originally published on March 23, 2021. It was last updated on March 25, 2022.
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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.
Can I Pay My Mortgage With A Credit Card
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Convenience Vs Cost: Is It Worth It
Although its one of the big four along with air, water, and food shelter is often the most expensive human need. And paying that big housing bill is even more frustrating for credit card rewards enthusiasts who see thousands in rewards going unearned each year.
But while you can find ways to pay your rent or mortgage with a credit card, even one that earns rewards, it isnt always the most worthwhile procedure.
Unless you have a card with points that you value above the amount of the processing fee or are working toward a big signup bonus, you may want to skip the plastic. Stick to old-fashioned checks to pay your rent or mortgage.
Paying Your Mortgage With Paypal
PayPal is an online payment platform that allows you to send and request money online with ease. You create a free account linked to either your credit card, debit card, or bank account to use PayPal. You can directly make mortgage payments with PayPal if your lender accepts them.
If they do not accept PayPal, you can use it to get a cash advance on your credit card. You can then use this to pay for your mortgage. To do this, you can transfer money to another user and have them move the money to their bank account and make the payment for you. They could also transfer the money to your bank, and you can make the payment yourself.
Since you are drawing money from your credit card, the high interest that applies to credit card loans applies here. You should think about it very carefully before you do this, to ensure that the benefits outweigh the risk. Usually, lenders give a 15-day grace period to pay your mortgage, after which a heavy late fee is imposed.
If you need more time to make the payment but do not want to pay the late fee and damage your credit score, you can choose to pay this way. As long as you pay back with the acceptable limit, you avoid paying the heavy credit card interest. If you can’t pay back within that time frame, you could end up paying a lot more interest.
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To Avoid A Late Payment
Your mortgage payment is usually due on the first of the month. However, many lenders give borrowers until the 15th to make their payment without a late fee. Once this grace period ends, lenders impose hefty late charges , but a late payment wont actually be reported to the credit bureaus until it is 30 days past due.
If you need more than the 15-day grace period to pay your mortgage but want to avoid a late fee and damage, you could pay your mortgage with a credit card on the 14th to buy yourself about 25 more days to make your mortgage payment, assuming you’re not carrying a balance on your card.
You could come out ahead if the payment processors fee is less than your lenders late fee and if you pay off your credit card balance in full by the due date. If you dont, you could end up in worse financial circumstances by paying credit card interest, depending on how long it takes you to repay what you owe.
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Why Pay Your Mortgage With A Credit Card
There are four reasons why someone might consider making their monthly mortgage payment with a credit card:
These are all valid reasons to pay your mortgage with a credit card. The first three of these reasons might give you a slight financial edge in the long run. The fourth could be incredibly destructive. Well look at each option in more detail below, but first, lets explore the logistics of paying your mortgage with a credit card.
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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