Managing a mortgage stands as one of the largest monthly expenses for households. When facing financial difficulties, the idea of using a credit card to cover your mortgage might seem appealing. But can you pay a mortgage with a credit card? And if so, how do you go about doing so?
Paying a mortgage with a credit card is possible, but it’s not as straightforward as it may sound. Also, using a credit card to pay for your mortgage can lead to additional fees, high interest rates and potential financial strain if not managed carefully. Explore our guide to learn more about the risks and benefits involved, as well as other alternatives to paying your mortgage with a credit card.
Can you pay your mortgage with a credit card?
Generally, you can pay your mortgage loan with a credit card, but it’s not as simple as paying your mortgage lender directly through your credit card company. Most mortgage lenders won’t accept mortgage payments from a credit card because they would be required to pay transaction fees.
However, you still have options if your lender doesn’t allow direct credit card mortgage payments. For example, some third-party payment processors let you use your credit card to pay your mortgage for a fee. You may also be able to pay your mortgage with your credit card by taking out a cash advance.
These approaches make it possible to pay your mortgage using your line of credit through your credit card company while avoiding restrictions from your mortgage lender.
Mortgage lender policies and restrictions on mortgage payments
Each mortgage lender creates policies and restrictions governing how you can make your monthly mortgage payments. It’s worth checking to see if your mortgage lender and credit card company allow direct mortgage payments on your credit card. That said, the likelihood is low.
The pros and cons of paying a mortgage with a credit card
Just because you can pay your mortgage with a credit card doesn’t mean you necessarily should. Before taking this approach, weigh all the pros and cons to ensure you choose the right option for your financial circumstances and goals.
Convenience and flexibility
Paying your mortgage directly to your lender doesn’t offer much flexibility. If you ever experience a short-term financial hardship or cash flow problem, you may struggle to make your payment on time.
Using a credit card means you don’t need to have the funds on hand to cover your whole mortgage payment. You’ll still need to pay your mortgage on or before your payment day, but you don’t need to have cash available. Plus, if you pay your credit card in full each month, your credit card issuer won’t charge interest for this service.
Earning rewards and cashback
Many credit card companies offer rewards and cashback to encourage you to spend more money. Credit card issuers often structure these bonuses as a percentage of your monthly spending. For example, the best credit cards offer rewards like 2% cash back on every purchase and 5% rewards on spending in specific categories like business expenses. If you have rewards credit cards and pay your mortgage with one of those cards, you’ll earn rewards on the payment amounts.
Remember to weigh the cashback and rewards you would earn against any additional fees you’d have to pay to use your credit card this way. If the interest and other fees add up to more than the value of the cashback and rewards, using your credit card to pay your mortgage likely isn’t worthwhile.
Avoiding late payments
Late payments on your mortgage can have devastating consequences. First, you risk damage to your credit and a negative item on your credit report. Eventually, you’ll face the threat of foreclosure and losing your home entirely. Putting your mortgage payment on your credit card can help you avoid these issues by giving you additional time to come up with the money for your payment.
Paying your mortgage with your credit card is only a temporary solution to avoid late payments. Only use this solution if your financial struggle is temporary and you can afford to make your credit card payment in full. If you need more than a month to solve the issue preventing you from making your mortgage payment on time, you’ll only increase your debt.
Transaction fees and interest charges
Unless you can make payments directly from your credit card to your mortgage lender, you’ll likely need to pay transaction fees and interest charges to use your credit card to pay your mortgage. Third-party payment services, for example, will accept your credit card payment and pass along that payment to your mortgage lender in exchange for a transaction or convenience fee.
If you take out a cash advance on your credit card to pay your mortgage, you’ll have to pay cash advance fees on the amount you borrow against your credit limit. The interest on cash advances is also often higher than the interest on traditional credit card debt, making it riskier, high-interest debt. Paying additional transaction fees or interest charges will increase the overall cost of your mortgage.
Impact on credit score and credit utilization ratio
Putting your mortgage on your credit card can negatively impact your credit score and credit utilization ratio. Your credit utilization ratio is the ratio of how much credit you’re currently using compared to your total available credit. The higher your utilization ratio, the closer you are to maxing out your credit and possibly facing financial problems. For that reason, creditors generally view a high credit utilization ratio as a sign you’re not managing your credit responsibilities well.
Paying your mortgage with your credit card means increasing the amount of credit you’re using and increasing your credit utilization ratio. Experts recommend keeping your credit utilization ratio below 30% to avoid negatively impacting your credit score. If putting your mortgage on your credit card would put your credit utilization ratio above this figure, consider whether the hit to your credit score is worth it.
Increased credit card debt
Paying with a credit card may seem like an easy way to make your mortgage payments later without incurring more interest, but that’s only true if you can fully pay your credit card balance by the due date. Credit card interest rates are typically much higher than mortgage rates. If you carry a high credit card balance, paying your mortgage with your credit card can significantly increase your monthly payment. Using a credit card for your mortgage is generally not the right approach if you want to reduce your credit card debt.
How to pay your mortgage with a credit card
Mortgage lenders typically won’t accept direct credit card payments, so you’ll have to get creative to pay your mortgage using your credit card. Some options include taking out a cash advance or using third-party payment services.
Third-party payment services
Third-party payment processors act as middlemen that allow you to pay your mortgage lender with a credit card while avoiding credit card restrictions. Instead of paying your lender directly, you pay one of these payment processors using a credit card. The third-party payment processor then takes that payment and gives it to your lender on your behalf.
One example of these third-party payment processors is Plastiq. For a transaction fee, Plastiq will let you pay your mortgage using your credit card. Even these third-party services have restrictions, though. Plastiq, for instance, doesn’t allow you to pay using an American Express card.
Certain credit cards allow you to draw from your line of credit using a balance transfer check. If you take this approach, you’ll write the check for the amount of your mortgage payment and deposit it in your bank account. Then, you can use the new funds in your account to make your mortgage payment. Using a balance transfer check takes the balance of your mortgage payment and applies it to your credit card instead.
Be aware that balance transfer checks can incur significant fees and higher interest rates than standard credit card charges. Be careful when using balance transfer checks to pay your mortgage, and only use this approach as a last resort.
A cash advance is when you borrow against your credit card’s limit by withdrawing cash. If you have the available credit, you can take out a cash advance equal to your mortgage payment and use this money to pay your mortgage lender. However, cash advances generally come with significant fees and higher interest rates than typical charges on your credit card.
Look into the fees and interest associated with cash advances on your card before pursuing this option. The cost of using a cash advance to pay your mortgage may outweigh any benefits.
Alternatives to using a credit card to pay your mortgage
Using a credit card to pay your mortgage may not be the best option in your situation. Consider alternative payment methods such as refinancing your mortgage or setting up automatic bank transfers.
Set up automatic bank transfers
Setting up automatic bank transfers to pay your mortgage each month makes payments simple and painless. You won’t have to think about sitting down monthly and transferring funds to cover your mortgage payment — the bank will handle it automatically. The drawback to this approach is that it can lead to problems if you don’t have enough funds in your account to cover your mortgage payment. In that case, you may incur late fees and other consequences for not paying.
Make bi-weekly or additional payments
Lenders typically only require monthly mortgage payments, but you can make bi-weekly or additional payments. Making these additional payments will bring down your mortgage balance faster, saving you money on interest. If you’re worried about being able to make future payments on your mortgage, paying more now while you have the funds available might be a good option.
Consider refinancing your mortgage
Refinancing your mortgage may lower your monthly payments by reducing your interest rate. If you can bring your current interest rate down by one percentage point or more, refinancing is generally a smart approach.
Compare the best mortgage lenders when shopping around to ensure you get the best rates and avoid hidden fees. When interest rates are low, refinancing your mortgage is one of the best mortgage payments struggling tips.
Summary of Money’s can you pay a mortgage with a credit card
In short, you can pay your mortgage with a credit card, but you’ll probably need to do so indirectly. Some options include taking out a cash advance or using a third-party payment service to make the mortgage payment.
Paying your mortgage on your credit card can earn you cashback and afford more flexibility when making your payments. However, you may have to pay transaction fees or additional interest, and your credit score may take a hit.