In some cases, you may want to pay off your mortgage with a credit card. The question is, it is possible?
The answer is, it depends. It’s possible, but it may cost you. So how do you do it, what’s the cost, and is it worth it? In this article, we’ll discuss the pros and cons of going this route, and whether or not it’s right for you.
Why would someone pay off a mortgage with a credit card?
It seems reasonable to pay off a mortgage with a credit card, as long as the bill gets paid. Some look at it as a roundabout way to rack in credit card rewards, or buy yourself time if you’re looking to cover a house payment and are short on money. In most cases, those who go this route are looking to hang onto their cash, and bank a couple of extra week’s worth of interest. You can buy a couple of extra weeks to pay the mortgage, without having to make a late payment to the mortgage company. In addition, those looking to pay a mortgage off with a credit card may also be looking for ways to avoid foreclosure at all costs.
How do you pay off your mortgage with a credit card?
There are third-party payment services that facilitate mortgage payments with your credit card. Currently, Visa and American Express don’t allow these payments through this service.
For those with other credit card companies, you can pay this third-party service a fee that equals a certain percentage of your mortgage payment every time you use your credit card. The third-party service then delivers an electronic payment if the lender accepts it, or cuts the mortgage lender a check. Ideally, you would then turn around and immediately pay back your credit card for the amount of the mortgage payment plus processing fee.
What factors should I consider when paying a mortgage with a credit card?
Fees vs. rewards: It’s tempting to want to pay off a mortgage with a credit card because you could earn rewards for that hefty chunk of chance. However, the cost of a third-party processing fee can counteract that completely and eliminate your earnings.
Interest costs: Putting a mortgage payment on your credit card can lead to costly interest charges if you don’t pay your credit card off in full every month. This long-term expense is a commitment, and one you need to stick to.
Credit score: Making a payment with your credit card will most likely take up a good chunk of your credit limit, and increase your credit ratio. Your credit score has a huge impact on your ability to make big purchase decisions, and you ideally want to keep the ratio 30% or lower.
So, is it smart to pay off a mortgage with a credit card?
If you can figure out a way to navigate these complicated waters, paying off your mortgage with a credit card is always an option. As long as the reward outweighs the cost, go for it! However if you’re already using a good amount of your credit limit or are short on money for bills each month, it’s probably not the best idea.