Homeowners looking to simplify their mortgage payments may wonder if they can pay their mortgage with a credit card. Putting your purchases on one card may be appealing, as it makes bill payments much more convenient, but it may not work for mortgage payments.
Many mortgage lenders don’t allow borrowers to pay mortgage bills with credit cards. This is mainly because of the service fees that credit card processors charge for their services. However, there are a few ways to get around this, and a few reasons why you would want to use a credit card for mortgage payments.
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Quick Summary
Credit cards can be used to pay for mortgages, but it’s not recommended because of several reasons.
Most lenders disallow using credit cards for mortgage payments, but homeowners have a few workarounds.
Key requirement: Third-party bill payment services and credit cards usually charge high service fees.
Tip: Homeowners struggling with meeting high monthly mortgage bills can take advantage of refinancing and home equity to tackle their financial needs.
Can You Pay Your Mortgage with a Credit Card?
According to the U.S. Census Bureau, the median monthly mortgage payment for American homeowners is about $1,904. That’s a significant sum, and covering that payment with a credit card can help simplify your monthly bills.
Most mortgage lenders don’t allow direct mortgage payments with credit cards because of the excessive processing fees most credit card companies charge. Most credit card fees range from around 1.5% to 5%, and with mortgage payments nearing $2,000, those fees add up quickly. A mid-range 3% processing fee on a $2,000 payment would be about $60, which adds up over a whole year and is enough to dissuade mortgage lenders from accepting credit card payments.
How to Make Mortgage Payments with a Credit Card
Lenders typically discourage paying one type of debt (like a home loan) by adding to another (like a credit card). Credit cards usually have higher interest rates than mortgage loans, making it even harder for lenders to accept this type of payment.
However, you have a few methods to circumvent lenders’ attempts to prevent credit card use for mortgage payments. These methods are unreliable and complicated, but may be helpful in a pinch.
The first is to use a third-party online bill payment service. However, these online bill payment processors usually charge a service fee. For example, most charge a service fee of around 3%, which could cost as high as $720 over a full year.
Another method is to use your credit card to purchase a prepaid gift card and use that to buy a money order, which you can use to pay your mortgage. This method is complicated, and many prepaid gift cards have a maximum value of around $1,000, so you’d either need several gift cards or have a very low mortgage payment.
Both of these methods are unreliable, complicated, and may result in higher interest rates or fees. If you’re just looking for convenience, it may be better to look at methods other than credit cards for paying mortgage payments. However, homeowners may opt for paying for their mortgage bills with credit cards for a few unique benefits.
- Tip: One of the best reasons to use a credit card for mortgage payments is to take advantage of large signing bonuses or high cash-back percentages from a credit card provider. However, pay attention to fees and interest percentages and ensure your cash back or signing bonus outweighs them.
Pros & Cons of Paying for Mortgages with Credit Cards
Homeowners who want to make mortgage payments with a credit card may be looking for a few specific benefits. However, this payment method comes with some serious drawbacks. Here are some of the pros & cons of using credit cards for mortgage payments:
Pros
- Building credit
Homeowners who want to build their credit score may want to use a credit card to pay their mortgage. Paying credit cards on time may build credit quicker than on-time, full mortgage loan payments, but remember to be attentive to your credit utilization. - Extended payment windows
Credit card payments can be delayed, while mortgage payments must be made on time each month. Homeowners in a financial pinch could delay a mortgage payment by using a credit card, but remember that unpaid credit card bills will incur interest. - Credit card rewards
Using credit cards with cash-back rewards is a popular way to help get money back from major purchases. Ensure that your credit card’s cash-back percentage outweighs any potential fees before using a credit card to pay a mortgage bill, even if you can cover the credit card expenditure immediately. - Large signing bonuses
Many credit card providers offer cash signing bonuses to new cardholders who make large purchases within a short period of opening their card.
Cons
- Processing fees
Credit cards and bill payment services all charge expensive processing fees. Most mortgage payments are over $2,000 per month, so these fees can add up. - Complicated
Because most home loan lenders don’t accept credit card payments, workarounds are complicated and expensive. - Credit score at risk
While quick credit card payments can help increase your credit score, failure to meet monthly payments or increased credit utilization can reduce your score. - Higher interest rates
Credit cards typically have higher interest rates than mortgages. Carrying any leftover balance from your mortgage payment could mean you pay much more in interest than you would with your mortgage. - Better, more convenient options
Many lenders provide convenient payment options, such as online payments or automatic checking withdrawals through ACH (automated clearing house).
Alternatives to Using Credit Cards for Mortgage Payments
Homeowners have many convenient options for paying mortgage payments. Here are a few easy ways homeowners can cover or reduce their monthly mortgage payment:
- Online payments
Most lenders offer easy and convenient online payment options. With internet resources, it’s easier than ever to ensure your mortgage bill is paid on time. Most mortgage lenders prefer automated payments because they provide secure, timely bill payment. - Refinance for lower payments
Homeowners struggling to make complete, on-time mortgage payments could consider refinancing their loans to secure lower monthly payments. Homeowners can take advantage of low-interest or low-credit options like FHA and USDA loans to reduce monthly payments and interest rates. Savvy loan refinancing could eliminate the need to overcomplicate your mortgage payments by using credit cards.
- Tap into home equity
You can tap into home equity with a Home Equity Line of Credit (HELOC) loan to pay additional bills, freeing up funds to tackle home loan needs. HELOC loans usually have lower interest rates than credit cards, as they are secured by your home’s value. - Investor options
Investors struggling to meet the high liquid cash requirements of conventional loans could take advantage of specialized mortgages like DSCR loans. These loans can provide additional monthly flexibility.
If you’re not sure which loan type works best for you, try our loan comparison calculator or contact Mortgage Marketplace for personalized home loan solutions.
Final Thoughts
Homeowners looking to use credit cards to pay their mortgage bills for convenience or to take advantage of lucrative signing bonuses and cash-back rewards may have a tough time. Most lenders don’t allow making mortgage payments with credit cards. Though there are some workarounds, they’re complicated, may charge processing fees, and are likely unnecessary for most homeowners.
Most lenders offer convenient payment options, and homeowners struggling with meeting steep monthly payments shouldn’t look to credit cards for help. They should instead try refinancing or taking advantage of home equity opportunities.
Homeowners seeking help finding lower monthly rates or convenient mortgage payment options are in the right place. Mortgage Marketplace is here to ensure your home ownership journey is a success; call us today at (833) 970-1560 to see how we can help you.
I appreciate the breakdown of closing costs—it’s something I hadn’t considered before. Great read!
Sammy P
Queens, NY
5/5
Great article! I didn’t realize how important it is to budget for maintenance and closing costs. Very helpful!
Jeremy M
Georgia, MD
5/5
This was super insightful! The tips on saving for a down payment cleared up a lot of confusion for me.
Tania N
Towns, CA
5/5
FAQ
Can I pay my mortgage with a credit card?
+Most home loan providers do not allow borrowers to make mortgage payments with credit cards. Homeowners can take advantage of third-party resources to pay their mortgage with a credit card, though most charge processing fees.
Can I pay my mortgage with a credit card to earn cash back?
+A major perk of credit cards is accruing cash back. Mortgage payments are an eligible expenditure, and large purchases like that can help gain significant rewards. However, ensure your rewards outweigh possible fees.
Is it illegal to pay your mortgage with a credit card?
+Paying your mortgage with a credit card isn’t illegal, but it may not be the best way to tackle this type of debt.
Is it a good idea to pay a mortgage with a credit card?
+Unless you can take advantage of significant credit card sign-up bonuses or reward opportunities, it’s rarely a good idea to pay your mortgage with a credit card. Addressing low-interest, secured loans with high-interest, unsecured debt like credit cards can easily lead to your debt spiraling out of control.
What are better alternatives to paying your mortgage with a credit card?
+The best way to tackle high mortgage interest rates and monthly payments depends on your financial situation. Many homeowners could refinance or use low-interest programs like FHA, VA, and USDA loans to address high fees. Others could tap into home equity through home equity loans and HELOCs to tackle other financial goals, freeing up additional funds for a primary mortgage.
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