Using Credit Card for House Down Payment
You cannot use a credit card for a down payment on a house. Home sellers and lenders do not accept credit card payments directly for a down payment. Mortgage lenders typically require down-payment funds to spend at least 60 days in a bank account to get “seasoned.” Besides, credit card limits generally are not high enough to accommodate a down payment for a house.
Benefits of Using Credit Card for Mortgage Payments
While you can pay for the entire property and closing costs using just your credit card, the interest rates will be extremely expensive compared to a mortgage. For example, a $300K mortgage with a 5% APR will have a monthly payment of around $1,600. However, if you pay with a credit card and have a 16% APR, it will cost you nearly $3,800 a month. On the other hand, you can use your credit card to pay for a portion of the down payment or just the closing costs.
Considerations for Using Credit Card for Mortgage Payments
Some people facing financial troubles may consider using a credit card to pay their mortgage to avoid a late mortgage payment and stay away from foreclosure. Whether you can pay your mortgage with your credit card depends on your lender’s payment acceptance rules. Some only allow you to make your mortgage payment through your checking account. Some lenders who accept credit card payments charge a transaction fee to process the payment.
Factors to Consider Before Using Credit Card for Mortgage Payments
When should you use a credit card to make your monthly mortgage payment? Despite the potential costs, there are select cases in which it may make sense to pay your mortgage loan with a credit card.
- If the rewards outweigh the fees.
- If you’re unable to make your regular payment before the end of the grace period and wish to avoid a late fee and its negative effect on your credit report.
Availability and Risks of Paying Mortgage with Credit Card
Typically, whether you can make a mortgage payment with a credit card depends on your mortgage lender, your card’s terms, and the network you use – Discover, American Express, Mastercard, or Visa. However, there are third-party services that provide a way to make these payments, but they charge a fee and may not be right for everyone.