Paying your mortgage with a Credit Card

A report by You Gov suggested that 8% of young people are paying their rent or mortgage with a credit card. This is despite the fact that mortgage companies are often unwilling to permit credit card payments.

The rise in use of credit cards is due to the increased cost of living in the UK. Rents and house prices have been rising causing homeowners, especially young homeowners to spend upto 50% of disposable income on rent and mortgage.

The Use of Credit Cards to pay mortgage is cause for concern.

The majority of credit card users pay off their balance at the end of the month. Thus paying on credit card gives you extra time to meet the payment. However, for those who struggle to pay their balance in full, they are likely to face interest rates of upto 18%. In effect they are borrowing at 18% to meet mortgage debt at 6%

A report by charity Shelter said that 1 million Britons have used credit cards to pay rent or mortgages in the past 12 months.

A big cause for concern is that a significant % of people are using credit cards to withdraw cash. Withdrawing cash on a credit card can gain an interest rate of upto 25%, creating a real problem of future debt payments.

With higher interest rates continuing to bite, this could cause serious problems in the future.

Should I pay my Mortgage on a credit card?

• It is important to meet your mortgage payments and avoid creating a bad credit report. However, you should avoid paying for it by withdrawing cash. Instead look for a low interest loan or overdraft.
• If you suffer from a long term lack of affordability it is best to consider a different housing option. Borrowing on a credit card is not a long term solution to a mortgage.
• If you can pay using a credit card and then always pay back the debt this is the best solution, because you will not be charged by your credit card company. However, make sure your mortgage company doesn’t charge for the use of credit cards. Mortgage companies are unlikely to be happy at the prospect of losing a % to credit card companies.

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