Can you pay your mortgage with a credit card?
When it comes to paying your mortgage, it’s not a good idea to use credit cards. Understand why credit cards and mortgages don’t mix, and find out where to get help if you’re struggling to keep up with your mortgage payments.
When it comes to paying your mortgage, it’s not a good idea to use credit cards. Understand why credit cards and mortgages don’t mix, and find out where to get help if you’re struggling to keep up with your mortgage payments.
Why would I want to use a credit card to pay my mortgage?
There are a couple of reasons why you might think about paying your mortgage with a credit card. It could be that you’re struggling to keep on top of your repayments and you need to buy yourself some time. Or perhaps you’re trying to qualify for a sign-up bonus on another credit card.
Debt: if you don’t have enough money in your current account to cover your mortgage repayments, you may be tempted to turn to credit as a quick fix. But borrowing more money isn’t the answer as it could lead to a more serious debt issue.
Rewards: some credit card providers offer an introductory bonus if you spend a certain amount within the first six months, or you might be trying to maximise points on your rewards card. It’s never a good idea to go into debt on a rewards card, as the interest rate will be very high. These cards work best if you clear the debt each month – any interest charged quickly wipes out the value of the reward.
Will my lender let me pay my mortgage with a credit card?
Many mortgage providers don’t accept mortgage payments made with a credit card.
You usually have to set up a direct debit when you take out a mortgage, and your lender will have carried out rigorous checks on your finances. They wouldn’t have approved your application if they thought that the only way you could pay was to borrow more.
Some lenders might accept a credit card payment in exceptional circumstances, but it’s generally not allowed.
If you try to pay on credit and your payment is rejected, this could adversely affect your credit score.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What’s wrong with using a credit card to pay my mortgage?
Even if your mortgage lender accepts a credit card payment, it may be treated as a cash advance by your card provider. This means that you’ll start paying interest on the payment immediately. If it’s not seen as a cash advance, you’ll still need to clear what you owe within a certain number of days (usually around 55) to avoid interest charges – unless you have a 0% credit card.
Any interest you pay on credit card debt will be on top of the interest you’re already paying on your mortgage. And credit card interest can be 20% or more, making it a very expensive form of debt. So, unless your financial difficulties are only very temporary, it’s better to find an alternative.
Alternatives to using a credit card for your mortgage
If you’re struggling to afford your mortgage payments, there is help available. Rather than using a credit card, try these steps first:
Contact your mortgage provider
If you’re in danger of missing a payment, get in touch with your lender. It’s better to be honest with them about your situation, rather than falling into arrears.
They may be able to help you by giving you a payment holiday, where you stop making payments for a while. This might give you the breathing space you need to get back on track. Another option could be to extend the length of your mortgage to make your monthly payments more manageable. You’re likely to pay more interest in the long run, though.
Think about downsizing
You may be in a position to sell your current home and pay off your mortgage. That way, you could take out a smaller mortgage on a more modest home or property in a more affordable neighbourhood. Whether this option could work for you will depend on your circumstances and the equity you have in your home.
Tell your lender if you’re facing financial difficulties and intend to downsize. They may give you time to sell your property.
Use your mortgage protection insurance
Mortgage payment protection insurance is designed to cover the cost of your mortgage payments for up to 12 months if you’re unable to work because of injury, illness or involuntary redundancy.
If you have a policy, check the terms and conditions to see what you’re actually covered for before putting in a claim.
Alternatively, you might be able to claim on other types of income protection, including accident, sickness and unemployment (ASU) cover.
Get free debt advice
If you want to talk through your options before making a decision, you can get free debt management advice from these organisations:
Citizens Advice
England – 0800 240 4420
Scotland – 0800 028 1456
Wales – 0800 702 2020
Northern Ireland – 0800 915 4604
National Debtline
0808 808 4000
StepChange
0800 138 1111
They will be able to check if there are any benefits or entitlements you might be able to claim and give you information that will help you decide on a plan of action.
If money problems are affecting your wellbeing, there are also a number of mental health charities you can speak to, including Mind and the Samaritans.
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