That sizable mortgage payment has gone out of your bank account, and you might find yourself asking whether there is a smarter way to handle such a thing. At BrickWood Mortgage, we get asked this question pretty regularly by our clients in regard to their monthly payment statements. Their question is whether they can just pay their mortgage using a credit card, which is something many homeowners discussing options with a mortgage company in South Carolina may also want to understand.
The attractiveness of that concept makes total sense. You might find yourself wishing to collect thousands of points in order to finance your next vacation. You may want to earn yourself a nice cash-back bonus that helps you offset some of your household costs. Or, you might need that little bit of extra time to get you through until your next payday, leading you to wonder, can you pay mortgage with credit card?
We totally understand the lure of squeezing every possible penny out of your financial tools. Managing a home loan is never easy, and considering different payment methods is part of being a smart homeowner. That said, trying to charge a home loan to your credit card account is anything but easy.
So, can I pay my home loan with a credit card? We’re going to break down exactly how this process works and whether or not it makes financial sense for you.
Why Would Anyone Use a Credit Card?
There are two main reasons why someone would consider charging their mortgage payment to their credit card. The first has to do with collecting credit card rewards. With your mortgage being the biggest cost that your household faces each month, it is reasonable to think that funneling that money through a reward card would generate tons of points for you.
For example, if your mortgage payment is two thousand dollars, it means that you could get twenty-four thousand points per year without changing your current spending habits.
Secondly, it may come as a result of temporary cash flow problems. You find yourself in a financial pinch, but you need to make that mortgage payment on time. Charging a mortgage to a credit card gives you the temporary liquidity you need to fulfill this obligation without incurring any late fees or affecting your credit report negatively.
How Does It Work?
If you try to contact your mortgage servicer about this matter, you will see right away that this option will be rejected. Banks run a tight margin on loan processing and won’t be able to absorb the costly processing fees charged by credit card networks. Therefore, you need to resort to other means of getting this done if you want to pay a mortgage with a credit card.
One way to make this work is to enlist a third-party payment platform. They act as an intermediary, taking your money through a credit card and then sending a check or a direct electronic transfer to your mortgage servicer. While this option gets the job done, you will incur a fairly substantial processing fee for the transaction.
Alternatively, you can request a cash advance on your credit card. Withdraw the funds, transfer them to your checking account and make your payment as usual. Another approach will be using the convenience checks issued by the credit card companies themselves and sent to you by mail. You can write the check either to your mortgage servicer or to yourself.
Can you pay your mortgage with a credit card? You can, but only through indirect means.
Advantages and Drawbacks
The pros of this approach are obvious. You get some instant liquidity to deal with those times when your finances are tight, thus keeping your mortgage in a good shape. If you’re using a reward card, you will earn some useful points for yourself provided that you pay off the credit card debt.
However, the negatives of charging your mortgage will be more pronounced. Payment services tend to levy relatively big transaction fees in the range of two to three percent. If your mortgage payment is two thousand dollars, you could spend an extra sixty dollars every single month. This will negate any advantage that you might earn from credit card rewards in most cases. So, paying a mortgage with a credit card needs careful thought.
A much bigger disadvantage is incurring additional fees if you opt for cash advances. A cash advance starts earning interest the moment the funds become available. There is no grace period on this transaction type. Plus, loading that mortgage on your credit card will significantly raise your credit utilization ratio and could harm your credit score.
FAQs
Does Paying a Mortgage With a Credit Card Hurt My Score?
Yes, it can do. The credit score is calculated using many different factors, with a primary one being the credit utilization ratio. This shows the percentage of credit you are using against the total available. Charging your mortgage to a credit card will raise that utilization ratio dramatically. Unless you immediately pay off that balance after making the purchase, your credit score will likely fall.
Do Mortgage Lenders Accept Credit Cards Directly?
No, they do not accept payments via a credit card directly. The credit network charges a rather big fee for every transaction, and banks cannot afford absorbing it into their processing costs. Standard payment methods include electronic transfers, personal checks, or money orders. No mortgage servicer will accept payments directly using a credit card.
Can I Trust a Third-party Payment Service?
Third-party services will not only be safe from a security standpoint, but they will offer the most reliable protection of your financial information. At the same time, you must consider the timeframe of such transactions. Some payment services can take several days to send the payment. Therefore, you need to start the process ahead of schedule, or your mortgage payment will be considered overdue.
Managing Your Money the Smart Way
In theory, this idea sounds great, but in practice, charging a mortgage to a credit card can put a serious strain on your finances and cause damage to your credit score. Depending solely on credit cards to manage your home loan and mortgage payment might leave you mired in a high-interest debt.
At BrickWood Mortgage, our mission is to assist you in making the right choices. If you are having problems with cash flow management, or you simply feel that managing your home loan can be done differently, we can help you in doing so. Contact us to explore different loan refinancing and modification options!
Paul Hankins, founder of Brickwood Mortgage, is a South Carolina native, entrepreneur, and seasoned mortgage professional with more than 23 years of experience in residential lending, real estate investment, property management, and renovation projects in South Carolina.
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