Can You Pay Your Mortgage With a Credit Card?
The answer is yes, you can pay a mortgage with a credit card. The better question may be: Should you pay your mortgage with a credit card?
Mortgage lenders typically don’t accept direct credit card payments, so you’ll need to arrange payments with a third party. There are benefits and drawbacks to using this approach to pay your mortgage, which should be considered carefully before choosing this option.
How to pay a mortgage with a credit card
There are several ways to pay a mortgage with a credit card. In most cases, though, this doesn’t include paying your mortgage with a credit card directly to your lender. “It’s important to be aware that all of the various avenues rack up fees that may add up to be higher than any late fee you’re trying to avoid, or more expensive than just buying those airline miles or other credit card rewards outright,” says Mayer Dallal, managing director of MBANC in Manhattan Beach, Calif.
These methods include using a third-party service to make the payment on your behalf, or choosing another workaround. The following methods outline how to pay your mortgage with a credit card.
Enlist a third-party service
You can pay your mortgage with a credit card using a third-party service. Once your payment is received, the third-party service will send a paper check or electronic payment through an automated clearing house (ACH) to your mortgage lender. Of course, having them pay your mortgage on your behalf comes at a cost.
Get a cash advance on your credit card
You can withdraw your mortgage payment amount using a credit card at an ATM or bank, and use that money to pay your mortgage. However, cash advances on a credit card often incur substantial fees. A typical fee is 5% of the cash advance amount. Also, if you withdraw the money at an ATM, you could incur additional fees.
Purchase a gift card to buy a money order
Another workaround is to purchase a gift card with your credit card, and use that gift card to buy a money order. Only Visa or Mastercard gift cards that operate like debit cards can be used for this transaction type, however. After purchasing the gift card, you’d need to set up a PIN to use the card as a debit card before going to a grocery store, bank or post office to purchase the money order.
Pros and cons of making mortgage payments with a credit card
Before making any mortgage payments with a credit card, evaluate the pros and cons to determine if the benefits outweigh the drawbacks.
You can improve your cash flow. If you’re short on cash, paying your mortgage with a credit card could give you time to get the cash you need. Once you have it, you can pay off the credit card balance.
You can boost your credit card rewards. If you’re close to a credit card rewards level — for instance, earning more points or airline miles — paying your mortgage with a credit card could provide the boost you need. Be sure to determine whether the rewards are worth the hassle and extra cost.
You may avoid a late payment on your credit report. Having a late payment on your credit report could damage your credit score, especially if they start to add up. Paying with your credit card could prevent late payments from affecting your creditworthiness.
Your interest charges and fees could add up. “The cons to using a credit card are a person has to pay a fee on top of their mortgage for the service, and they have to pay interest on top of the interest of their mortgage if they do not pay off the credit card debt in full at the first statement,” says Khari Washington, owner of 1st United Realty & Mortgage in Loma Linda, Calif.
Your credit score could be negatively impacted. “One of the biggest problems, in addition to incurring debt and fees, is what it could do to your credit score,” Dallal says. “Debt utilization — or how maxed out your credit cards are — is a major factor impacting your credit score.”
You may experience more trouble than it’s worth. Having to jump through hoops to pay your mortgage with a credit card could be more time-consuming and difficult than expected.
Should you use a credit card to pay your mortgage?
As with all financial decisions, the most important step you take in deciding whether to use your credit card to pay a mortgage is to determine if the costs are worth the rewards.
“Homeowners need to do a cost-benefit analysis to see if they are gaining anything by paying with a credit card,” Washington says. “In most cases, they aren’t.”
Weigh the following considerations before you make a decision:
→ Add up all the fees involved. “It’s critically important to calculate the fees that come with using the various services and options for paying your mortgage with a credit card,” Dallal says. “Take the time to find out exactly what the fees are, do the math and figure out if this is worthwhile or will just wind up putting you deeper into debt.”
→ Determine when you can pay off your credit card. If you can pay your credit card off quickly, the fees could cost less than any late fees your lender charges. However, if you can’t pay it in a timely manner, interest will accrue, adding to the cost of paying your mortgage with a credit card.
→ Compare the costs of buying credit card rewards outright to earning them through payments. If you’re close to moving up to the next rewards level — say, earning a boost of airline miles — find out how much buying those miles would cost. Then compare that amount to the fees you’d incur from using your card for mortgage payments.
→ Find out your mortgage lender’s grace period. Many lenders give you a grace period, typically 15 days, to make your mortgage payment before charging a late fee. This could provide the extra time you need to make your payment.
→ Talk with your lender if you need an extension. If you’re having trouble making your mortgage payments on time, check with your lender to see what help they can offer. Many lenders have programs to provide assistance — including mortgage forbearance — if you’re having financial difficulties.