Can (And Should) You Pay Off Your Mortgage With A Credit Card?
Sidney Richardson5-minute read
September 27, 2022
If you’ve ever wondered whether you can make mortgage payments with a credit card, the answer is actually yes, technically. But how is it possible, and more importantly, is it a safe financial decision?
If you’ve ever been interested in paying your mortgage using credit, here’s what you need to know about how it’s done and the risks that might be involved.
What Should You Consider Before Paying Your Mortgage With A Credit Card?
Using a credit card to pay your mortgage has some benefits and risks, which is why it’s not an easy decision to make. Before you decide whether it’s the right option for you, it's crucial to analyze your credit report so you know where you stand because paying your loan this way can negatively affect your credit score if you don’t pay off your credit card balance each month.
And of course there are interest fees and other charges that come with doing this. If your credit card bill has mortgage charges you can't pay off each month, you’ll be required to pay interest.
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How To Pay A Mortgage With A Credit Card
If you want to pay for your mortgage using a credit card, you’ll typically have to use a third-party service. Mortgage lenders and credit card companies usually don’t allow credit cards as a valid payment method for a mortgage, but there are ways to get around this.
Third-party companies such as Plastiq allow you to make a mortgage payment to them using your credit card, which they then pay to your lender in the form of a check or other money transfers. Companies like Plastiq usually label this charge as a “purchase” rather than a cash advance, which negates any cash advance fees you might have to pay otherwise.
Making a payment through a third-party company allows you to pay for your mortgage using credit, which is otherwise not typically possible. This isn’t a free method, however – companies like Plastiq make their money by charging a processing fee for their services that can get quite expensive. The fee charged by Plastiq as of 2022 is around 2.85%. This fee alone will make most mortgage clients not consider paying their mortgage with a credit card, and this doesn’t include interest if you aren’t able to pay it back immediately.
Another way to pay your mortgage with a credit card is by purchasing a money order. You can buy a money order with your credit card and use those funds to help pay for the house. Credit card holders can deposit the money to the bank or send it to their servicer. You should be aware that most money orders have a $1,000 limit, meaning you may have to buy multiple orders to cover your mortgage costs. Unfortunately, almost all credit card companies will consider this as a cash advance and you’ll be hit with a fee and high interest, that starts immediately when purchasing the money order. This makes it something that is most likely not a great idea.
Why Pay For Your Mortgage With A Credit Card?
There are multiple reasons someone might consider paying their mortgage with credit, so let’s explore a few.
- Receive credit card rewards: Some issuers offer credit card rewards to cardholders for signing up initially or spending a certain amount in a specific window of time. Earning rewards, a significant amount of cash back, miles or a sign-up bonus can make paying for your mortgage with credit very worthwhile. To fully benefit from these rewards, they’d have to be greater in value than the fee you pay to use your third-party service, which usually won’t be true for the average cardholder.
- Avoid late payments: If you can’t make a mortgage payment on time and want to avoid making a late payment and dealing with any late charges and credit damage, you can use a credit card to make the payment right away and then repay the amount once you have the funds. This can become extremely risky because you can easily fall into credit card debt by using this strategy.
- Delay foreclosure: Similar to avoiding late payments, it’s possible to use credit for mortgage payments to avoid or postpone losing your home to foreclosure. This is not advised for homeowners who are falling behind on payments, however, because you risk putting yourself in even more debt that will continue to grow and accrue interest. If you are having trouble with your payments, reach out to your mortgage servicer for help first.
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. It’s 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:
- There are expensive third-party fees. While costs such as Plastiq’s 2.85% fee may not seem like much, they may outweigh any benefit gained from rewards.
- Your payment may be rejected. Your payment via a third-party company may be rejected by your card issuer, particularly if the amount you’re paying exceeds your credit card If something like this happens, you may end up paying late fees or falling behind on payments, which is not ideal if you’re using credit to avoid making late payments in the first place.
- The potential to fall into debt. If you’re paying with credit to avoid foreclosure or late payment fees, there’s also a real risk of falling into even more debt. The longer you go without paying back what you borrowed for your mortgage payments, the more interest you will accrue, making it more difficult to repay your issuer.
- You could seriously damage your credit score. Unless you already have a good credit score and are looking to maximize your credit rewards, paying your mortgage in credit is risky and typically not advised. If you can’t pay back what you borrowed for your mortgage payments immediately, it can cause your credit utilization ratio to exceed the recommended 30%, which can damage your credit score, potentially making it more difficult for you to qualify for loans in the future.
Are There Any Alternatives To Paying Your Mortgage With A Credit Card?
If you’re struggling to pay your mortgage, using a credit card is not always the most suitable option, so here are a couple of alternative choices you should consider:
- Mortgage forbearance: Mortgage forbearance is when your lender permits you to pay your loan at a lower rate temporarily, and sometimes they may even pause your payments during this period.
- Financial counseling: A financial counselor can help you create a payment plan that best suits your needs based on your financial situation or may be able to suggest some different options.
The Bottom Line: Should You Pay Off Your Mortgage With A Credit Card?
While it’s possible to pay for your mortgage with a credit card, it can be costly and potentially very risky as well. Those who can immediately repay their credit card balance after making a mortgage payment might see benefits like increased rewards, including cash back and other bonuses.
However, those who can’t repay what they borrowed right away run the risk of severely damaging their credit score and increasing their debt. Considering this, paying one’s mortgage with a credit card is typically not advised for most homeowners, as the risks outweigh the potential benefits.
Want to learn more about the home buying process or explore your financing options? Check out the Rocket Mortgage® Learning Center for tips, tricks and resources to help you through your journey as a homeowner.
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