Can you use credit card for house down payment

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In times of financial hardship, paying a mortgage with a credit card can help you buy some time and even give you the option to pay off a single mortgage payment over several months.

Paying a mortgage with a credit card can also be a way to scoop up truckloads of rewards—or even earning a sizable welcome bonus you couldn’t normally earn via regular spending.

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Can You Pay Your Mortgage with a Credit Card?

Technically yes, but it’s not easy. You’ll face a few problems as you try to pay your mortgage with a credit card. First off, banks offering mortgage loans do not typically allow you to pay with a credit card directly, so you’ll have to find a workaround.

The next problem you’ll face is that, like it or not, the workarounds enabling you to pay a mortgage with a credit card can cost money and the expense can make paying your mortgage with a credit card considerably less attractive if you’re in it for the rewards.

There are a few instances where it can absolutely make sense to pay your mortgage with a credit card—even if some added fees and steps are involved.

Should You Pay Your Mortgage With A Credit Card?

Whether or not you should pay your mortgage with a credit card will, in some part, depend on if you gain any advantage by doing so. For many, figuring out the many workarounds needed to use your credit card isn’t worth it unless there are non-mortgage-related benefits. There can be a few.

Earn Rewards

For the most part, it can make sense to pay your mortgage with a credit card when you’re pursuing a credit card welcome bonus you couldn’t earn otherwise. Imagine for a moment you wanted to apply for a credit card offering a welcome bonus of 60,000 points after you spend $4,000 in the first 3 months of opening the card. If you don’t normally have enough expenses you can pay with plastic to reach the threshold, paying your mortgage with a credit card can leave you significantly ahead—even if you pay a percentage in processing fees to do so.

It can also make sense to pay your mortgage with a credit card if you’re earning a higher rate of rewards than the card processing fees you’ll need to pay. For example, let’s say paying your mortgage with a credit card results in 2.5% in fees, but you have a credit card offering a flat 3% back. In this case, you can pay your mortgage with a credit card, pay your credit card bill in full each month to avoid interest and pocket the 0.5% in rewards—that’s $5 in rewards for every $1,000 in payment made.

Consider Fees and Interest

It doesn’t usually make sense to pay your mortgage with a credit card if you want to spread out your monthly payment or catch up on bills. Your mortgage likely comes with a low and often fixed interest rate, whereas the average credit card interest rate is currently over 16% and many credit cards have variable rates. If you transfer secured debt at a low rate to an unsecured credit card charging a steeper interest rate, you’re putting yourself on a slippery slope to financial disaster.

Avoid Late Payments

If you decide to use a credit card to pay your mortgage, make sure you have the cash in the bank to pay your credit card bill in full each month. If you let your balance linger and the interest starts piling up, any benefit of paying your mortgage with a credit card goes out the window, fast. Recurring late payments will not only put your mortgage payments at risk, it can destroy your credit.

If you are in a situation where you cannot pay your mortgage by its due date but you will be able to pay it off by your next credit card bill—say your paycheck arrives before your statement, but after your mortgage due date—you can charge your mortgage to a credit card. Doing this allows you to avoid a late fee or penalty and you can simply pay in full once you receive your paycheck and, afterward, your credit card statement.

Even when your paycheck is guaranteed, this may be a very risky move: paychecks can get lost in the mail, arrive late or in the worst case your company can file for bankruptcy. If you’re paycheck-to-paycheck already, other expenses may have to come first and you’ll end up accruing more debt on the credit card than you would if you’d made a late payment on your mortgage or found another way to borrow the money.

Avoid Foreclosure

While you could theoretically use your credit card to avoid foreclosure in a similar way to the “avoiding late payments” method described above, we do not recommend doing this. Adding extra credit card debt on top of your multiple missing mortgage payments is unlikely to improve your situation or allow you to keep your house in the long run. Research other ways to avoid foreclosure and focus on keeping your credit card bill paid off in order to minimize your debt and help improve your circumstances more quickly.

How to Pay Your Mortgage with a Credit Card

While paying your mortgage with a credit card can seem like a pain, there are some scenarios where the added rewards are worth it. But, how do you pay your home loan with a credit card? Here are the two main options you could consider.

Use Plastiq.com

Plastiq.com is a third-party service enabling people to pay many bills using a credit card in exchange for a 2.85% fee. Not so long ago, the fee to use Plastiq.com was only 2.5%, so this increased fee will absolutely eat away at reward returns. Flat-rate rewards on all purchases are extremely rare above 3%.

While you can use most credit cards with this service to pay bills like utilities and payments to contractors, there are only a few card types you could use to pay your mortgage specifically with Plastiq.com. These include Discover, some types of Mastercards, JCB International cards and Diners Club International credit cards. Your options may be limited if you have a different card issuer.

You can come out ahead in several ways. Let’s say you sign up for a card offering 3 points for each dollar you spend. Let’s also assume each mile is worth one cent in travel. In this scenario, you can effectively pay your mortgage through Plastiq.com with this card, earn the equivalent of 3% back and pay only 2.85% in fees. That’s a tiny sliver of reward to pursue, but the math does work out and if your mortgage is large enough, you can still make a tidy profit without leaving your couch.

You’re much better off using Plastiq.com on a temporary basis to earn a big welcome bonus. As an example, let’s say you sign up a card to earn a welcome bonus of 60,000 points after you spend $4,000 in the first three months of opening the card. If you funneled $4,000 in mortgage payments onto this card using Plastiq.com, you would pay $114 in fees, but earn 60,000 points. If each point is worth 1 cent, you’re still $486 ahead.

While forking over 2.85% for each payment you make can add up, the bill payment service does let you avoid fees if you refer friends. Once you sign up, you can access a referral code you can share with other people. When someone uses your code to sign up and they make a payment, you’ll earn “fee-free dollars,” which you can use for fee-free bill payment.

Convert Gift Cards into Money Orders

Another option is buying pin-enabled Visa gift cards with your rewards credit card, then using those gift cards to pay for money orders. Most people can buy pin-enabled gift cards at a grocery store, which can make sense if you have a grocery store credit card offering bonus points in this category. (Note that most cards will exempt any kind of gift card or cash equivalent purchase from earning rewards in their terms and conditions). From there, you can set up your PIN and use your gift card to purchase money orders from banks, a grocery store, Walmart or anywhere else money orders are sold.

Your ability to pull this strategy off may be somewhat location-specific. For example, your local grocery store may have a strict policy when it comes to the types of cards you can use to buy money orders. You may also find your average grocery store customer service person couldn’t care less how you pay, so it might be hit or miss.

Also keep in mind that some banks specifically say that gift cards are considered a “cash equivalent” and do not earn rewards. While this may not prove to be true if you buy the occasional gift card, as soon as you start buying thousands of dollars of gift cards each and every month things could change.

You’ll also want to think about how you’re going to use the money orders to pay your mortgage. This is important: If you live near a brick and mortar branch of the bank that holds your mortgage (like Chase or Wells Fargo), you can visit your bank in person and pay your mortgage payment with money orders directly. But if you have to mail your money orders to your mortgage lender, you may want to think again.

You can save the receipt for your money order and ask for a replacement in most cases if it’s lost in the mail, but there are added steps and there may be fees involved in doing so. Your mortgage payment can also be late if your money order winds up lost, which could lead to even more problems.

Earning rewards using any gift card scheme is unlikely. Credit card companies have “wised up” to reward earning on cash equivalent purchases, so this method is less about rewards earning and more about stop-gap measures to use a credit card as payment for a mortgage.

Pros and Cons of Paying Your Mortgage with a Credit Card

Pros

• You may be able to earn credit card rewards.
• If necessary, you can avoid late payments by “delaying” the due date with a credit card (only recommended if you can pay your credit card bill in full).
• Though it is a complex process, paying your mortgage by credit card can help you maximize the benefits and make full use of your credit card.

Cons

• You will need to find a workaround, since mortgage lenders do not accept direct credit card payments.
• Relying too much on your credit card to make mortgage payments can easily worsen your financial situation if you do not stay on top of your credit card payments.
• If you use Plastiq, the company will charge a 2.85% credit card processing fee, which can add up fast and may outpace reward earning.

Bottom Line

Before you decide to pay your mortgage with a credit card, make sure you understand the fee structures and all the extra work involved. Generally speaking, you should only pursue this option if you have the cash in the bank to pay your credit card in full. You should also only pay your mortgage with a credit card if the fees you pay are considerably less than the benefit you’re getting in return.

Also consider whether your energy could be better spent elsewhere. There are many ways to earn more rewards over time and paying your mortgage with a credit card is only one of them. We suggest checking whether your other bills can be paid with a credit card without any added fees. For example, you may find you can pay for health insurance or daycare with a credit card without an added charge. Also check whether you can pay utility bills, college tuition, contractors you’re working with and any other bills you pay on a regular basis with a credit card.

At the end of the day, covering your mortgage with a credit card can make sense, but don’t forget all the other ways you can earn rewards. With some creative thinking and a few credit card welcome bonuses, you could be rolling in points and miles for years to come.

Frequently Asked Questions (FAQs)

Can I pay my mortgage with a credit card?

Yes. Technically paying down your mortgage with a credit card is possible, but it is a complicated process. Mortgage lenders do not accept direct credit card payments, so you will need to find a workaround service like Plastiq in order to carry out the transaction.

Is there a fee for Plastiq?

Plastiq, a payment processing service, generally charges a 2.85% credit card processing or payment fee (which it calls the Plastiq Fee) on every payment you make. If you are using a debit card, the current Plastiq Fee is 1%. Additional fees may be incurred depending on the card issuer’s country and method of delivery.

How can I reduce my Plastiq fees?

Plastiq offers reduced and adjusted pricing for select recipients within the United States and Canada. If you make a payment to these organizations or companies, the adjusted Plastic Fee is typically 0%. Plastiq is also currently offering a discount on payments made using debit cards, from 2.85% to only 1%.

Find The Best Credit Cards For 2022

No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.