Can (And Should) You Pay Off Your Mortgage With A Credit Card?
Sidney Richardson4-minute read
February 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.
How To Pay For Your 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 to do so. Mortgage lenders usually do not accept credit cards as a valid method of payment, 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 transfer that is accepted as a method of payment. Companies like Plastiq usually label this charge as a ‘purchase’ as well, 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 in this way allows you to pay for your mortgage using credit, something that 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 current fee charged by Plastiq as of 2021 is around 2.85%.
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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, it’s 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 let’s explore a few.
- Credit card rewards. Some issuers offer credit card rewards to cardholders for signing up initially or for spending a certain amount in a specific window of time. Earning a significant amount of cash back, miles or a sign-up bonus can make paying for your mortgage with credit very worthwhile. In order to fully benefit from these rewards, however, 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 won’t be able to make a mortgage payment on time and want to avoid making a late payment and dealing with any late charges, you can use a credit card to make the payment right away and then repay the charge once you have the funds. This can become extremely risky however, since you can easily fall into more debt by using this strategy.
- Delay foreclosure. Similar to avoiding late payments, it’s possible to use credit for mortgage payments in order to avoid or postpone losing your home to foreclosure. This is not advised for homeowners that are falling behind on payments, however, because you risk putting yourself in even more debt that will continue to grow and accrue interest.
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:
- There are expensive third-party fees. While costs such as Plastiq’s 2.85% fee may not seem like much, they can add up. If your monthly mortgage payment is $1500, you’d be paying an extra $42.75 every month – that’s an additional $513 a year.
- 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 limit. If something like this happens, you may end up paying late fees or falling behind on payments, which is not ideal if you are 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 very 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.
The Bottom Line: Should You Pay Off Your Mortgage With A Credit Card?
While it is possible to pay for your mortgage with a credit card, it can be costly and potentially very risky as well. Those who are able to immediately repay their credit card balance after making a mortgage payment might see benefits like increased rewards, including cash back and other bonuses.
Those who are unable to repay what they borrowed right away, however, run the risk of severely damaging their credit score and increasing their debt. That being said, paying your 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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