There could be several reasons a debtor may want to pay his mortgage off using his credit card. Sometimes, you may encounter some hardship circumstances while paying your mortgage; that is the time when your credit card can help you and provides you some options to pay off your monthly mortgage payment above numerous months.
Although paying the mortgage off with a credit card can help you score a load of rewards, you may explore a few problems as well. Such as, you may not get a mortgage loan again from the same company because you paid your payments with your credit card, which means you might be short of money to pay them.
Besides, only a few loan companies accept debt-to-debt payments, and you need to find such companies to pay your debt through a credit card. Paying your mortgage via credit cards depends upon various factors, which include your mortgage lender, credit card network such as American Express, Visa, Discover, or MasterCard, and the card issuer.
Now that you’ve got to know that you can pay off your mortgage using your credit card, how can you execute this process? When is the right time to use your credit card, and what obstacles may you encounter while doing this process?
How to Pay Off your Mortgage Using a Credit Card?
You can use your credit card and pay off your mortgage to the company or the lender directly. This option is practical if your credit card company, network, and mortgage company have permitted you to make your payments this way.
If you have acquired a mortgage loan from a creditor who does not accept credit card payments, you can still make his payments via credit card. You can adopt a third-party payment service, but you must possess a Discover credit card or a MasterCard to utilize this service.
With such a service, you would have to pay an owning fee of 2.85%, and you can add your credit card to your bank account. Moreover, you must bear in mind that the interval after making payment through this service could be up to 8 to 10 working days for the creditor to receive this payment. Therefore, you must execute this process consciously and by keeping several factors in your mind.
How does it work with a Third-Party Service?
You can use a third-way service to pay your mortgage in case your lender does not accept credit card payments. However, different tactics can be chosen to perform this procedure. The easiest one is using the company that holds your credit card payments and aids you pay your mortgage to the company directly.
The most renowned company is Plastiq, which enables you to settle your mortgage payment only if you own a MasterCard or a Discover credit card. However, this service charges a fee of 2.85% of your mortgage payment which is enormous.
Another method to pay off your mortgage is using wire transfer, direct deposit, or through check. With these methods, you do not require any endorsement from your lender.
Whatever method you adopt to settle down your mortgage payment, identify its fee and step forward if it is suitable for you.
Obstacles to Pay Off your Mortgage Through Credit Card
While paying your mortgage payment using your credit card, you may face some hardships. One of these hurdles includes paying your credit card balance on time; you would be surrounded by a tremendous interest rate accumulated from your mortgage payment, which would be thousands of extra dollars.
Notwithstanding, if you pick a third-party option, you would be charged a considerable amount in the name of its fee, which would be 2.85% of your mortgage amount. For instance, you obtained a house mortgage of $2500; you need to pay approximately $71 each month, which becomes $855 annually.
When it Makes Sense to Use a Credit Card for Paying your Mortgage Off?
It can make sense to pay your mortgage off using a credit card if our reward rate is higher than the fee you pay. For instance, if you’re paying a fee of 2.85% of your mortgage payment, but your credit card offers you 3% cashback on every charge. In this case, you would prefer using a credit card instead of going for any third-party service to avoid interest rates, and you would be rewarded with a 0.15% bonus.
In another case, you should also use your credit card for mortgage payments if you look forward to a credit card welcome bonus. But for this, you need to wait for the time when you want to apply for a credit card that offers a welcome bonus. For instance, if you spend $4,000 in the first three months, you probably would get a bonus of 60,000 points.
How it Affects your Credit Score?
If you have a credit card dent, too, it can negatively influence your credit score. Your credit score should be not more than %30 in order to sustain a high score. The lesser it is, the more I would be maintained.
For instance, if you have a limit of $3,000 and you use your credit card to pay a $2,100 mortgage payment, it means you have utilized a score of 70%. If you plan to pay your credit card balance fast, your score should be lesser. However, if your score is high, but you are financially solid, then it might be worth using your credit card to pay off your mortgage.
Final Thoughts
Using a credit card for mortgage settlements could offer several consequences. It is not only about using a credit card, but you may find some drawbacks of choosing the third-party service. However, it is recommended to avoid such methods to pay your mortgage off because it can cost you thousands of extra dollars and substantially lower your credit score.
If you don’t find any way to pay your monthly mortgage and there’s no option other than using your credit card, talk to your creditor first to negotiate some time or to provide some leniency to lower or suspend your payments.
| If you want to get to know about some effective ways to pay off your mortgage, Truth in Equity is always there to help you. Consult an expert now and recognize some efficient strategies to get rid of your mortgage. |