There comes a time in every person’s life when they want to settle down and buy a place they can call their own home. Whether it is due to a need to become independent or wanting to settle down to start your own family, the first step to settling down is to buy a home.
Although it is possible to buy a house by paying the entire amount upfront and in cash or getting a loan, a vast majority of people tend to apply for a mortgage due to the benefits and long-term uses it offers.
When paying off your mortgage, you can pay in cash. Still, due to the innovations in modern society, you can now pay your mortgage with a credit card from the comfort of your home through online payments.
Not only is it a highly convenient option to pay off your mortgage, but many benefits are exclusive to paying off your mortgage using a credit card.
In this article we will discuss credit cards and mortgage payments in more detail, highlighting some advantages of opting for credit card payments for your mortgage. In addition, we will talk about some of the factors you should consider when paying a mortgage with a credit card and highlight the process.
Mortgage: What Is It and Why Is It So Important?
To properly understand everything related to credit cards and mortgage payments, building a solid foundation is essential. Let’s first discuss what mortgage is and better understand the concept behind this term.
A mortgage is a mutual agreement between you and the lender, with some terms and conditions attached.
One of the main is the right given to the lender to take over the property mentioned in the agreement if you fail to return the amount of money borrowed from the lender, including the decided-upon interest, within the period mentioned in the mortgage contract.
The main reason many people prefer taking a mortgage as opposed to getting a loan from the bank is that it allows them to pay for the property without paying for the entire home upfront.
Furthermore, another selling point for taking out a mortgage is that when paying it off, the property price would not be subject to any change throughout the duration your mortgage payment plan is active. Still, only the interest amount would change throughout mortgage payments.
This is especially useful primarily because certain properties can significantly cost money. An average mortgage plan can last 15 to 30 years, which is a great amount of time.
During this time, the real estate market can undergo a great amount of alteration, resulting in certain developments causing your property’s value to increase. However, when applying for a mortgage, you do not have to worry about this due to this type of loan’s fixed property amount aspect.
Can I Pay the Mortgage With a Credit Card?
Before getting an answer to this question, we must understand what the terms good and bad debt mean, as it has direct ties with credit card payments.
Buying an object that does not result in profit is known as bad debt because your investment will not return any money. On the other end, investing in an idea or enterprise that can enable you to make enough money to break even and profit from is known as good debt and is beneficial.
Keeping this information in mind, the mortgage is known as good debt, primarily because when you are making timely mortgage payments according to the agreement, you are increasing the net worth of your home with each payment, which provides you with the ability to make a profit when cashing out and selling your property.
Now that we have established the idea that paying the mortgage with a credit card is considered to be good debt, let’s discuss how you can pay off your mortgage loan using a credit card.
How To Pay Your Mortgage With a Credit Card
Due to the astronomical price tag attached to real estate and housing, it is very rare and highly unlikely for someone to pay upfront in cash when investing in a home. Due to this, the concept of mortgage was invented to make buying a home convenient and affordable for the general public.
The first step is getting approved regardless of the mode of payment you are opting for when planning to pay off your mortgage. Furthermore, even when your mortgage has been approved, it is not as easy as paying off your property value in chunks.
Mortgage comes with an added element of interest needing to be paid along with the mortgage amount, and in most cases, the first payments primarily consist of the interest amount.
This is financially disadvantageous to you because these initial payments would not contribute to your net worth and would not be considered a cash-making asset for you at this point.
However, making credit card payments can assist your net worth, allowing you to make some money even at this stage.
Although they vary according to your card issuer, network, and mortgage lender, you can earn various rewards when making credit card payments, such as frequent flier miles and possible cashback.
However, something to understand is that most lenders do not deal with credit cards and mortgage payments. When dealing with such a situation, many consultants recommend availing of third-party payment services, which can assist you further.
Third-party Payment Services
When dealing with mortgage lenders, there are many reasons why they may not be willing to provide you with the option of paying the mortgage with a credit card, which may be due to a few reasons.
An important reason is that doing so would allow their customers to trade one form of debt for another, with the latter having no tax deduction and involving a higher interest rate.
Whatever the reason, it is advisable to redeem the services of third-party payment processors, which consist of many companies that allow you to use your credit card to pay with almost any entity.
However, even when using these third-party services, there are still a couple of limitations that you have to consider, including the fact that most of these processors have certain terms and conditions set up that only allow the use of certain specific credit cards to pay off your mortgage.
Why You Should Consider Paying Mortgage With Credit Card
- To Earn Rewards
Although their nature may vary slightly from bank to bank, a majority of credit cards offer the user two main types of rewards in the form of sign-up bonuses and ongoing rewards.
These rewards differ by nature, but they can allow you to redeem cashback offers after spending a certain amount.
Often, these rewards may not seem like much, but they are especially beneficial when dealing with specific situations.
- To Earn Interest
How it works is that if you carry a credit card with no impending balance, the bank gives you a grace period of up to 25 days, during which all your purchases are considered interest-free.
Depending on how you utilize it, you can take advantage of this grace period by storing your finances in a savings account where it would be earning interest until the due date for your credit card, netting you some additional capital.
- To Avoid Foreclosure
In addition to offering you rewards, another benefit of paying your mortgage with a credit card is that it allows you to avoid foreclosure.
If you are behind in your payments and on the brink of losing your property, you could talk to your lender and decide on a plan to avoid foreclosure.
Wrap-up
This condensed guide talked about the possibility of mortgage payment with a credit card. While it is possible, there are some steps that you need to take in order to in terms of working with a third-party payment service.
Furthermore, we also discussed some of the benefits that you can take advantage of when exercising the option of paying for your mortgage with a credit card. While it might be a little bit of an elongated process to set up, it could potentially be worth it in terms of gaining more equity in your property and reaping the rewards that your credit card offers you.
