You can charge just about anything on your credit card, but does this make sense when it comes to mortgage payments? It depends on how you go about it. If you lived in the US, you could switch your mortgage to a company, which offers payment services for mortgage payments (e.g. American Express). This is for customers with good credit.
In Canada, paying your mortgage with a credit card is not the best of ideas for several reasons. Credit cards are offered with different interest rates, true, but they are considerably higher than the rate on your mortgage. Interest rates on credit cards usually vary from 10 percent to 25 percent. If you happen to get behind on paying your monthly balance, you will pay interest on mortgage interest. This is what you call a double whammy of debt.
Second, doing it is not feasible in all cases. You should have a large line of credit to cover mortgage payments, which are usually quite big. Moreover, carrying a high balance because of mortgage payments may affect your credit score. There it is another double whammy.
Third, charging mortgage payments to your card may incur additional costs. This is if you use the cash advance feature of your credit card, and many people do use it to this purpose. Cash advances are associated with high transaction costs, and this should not be an eye-opener. The charge can be as high as 2.9 percent of the mortgage loan or it may be in the form of a flat fee.
Finally, using credit cards to cover mortgage payments gives cardholders a false sense of security and cash flow. Feeling extra rich, this leads to more spending and larger amount of debt.
You can charge mortgage payments to your card, despite the downsides. But when should you really do it? Depending on the lender, late payments may result in drastic consequences. Missing just one rent payment, for example, may result in eviction proceedings against you. This can leave you on the street before you realize it. The same goes for home equity and mortgage lenders that have short fuses. Credit card issuers, on the other hand, may wait for months before they resort to collection actions.
It is important to know the consequences so that you can prioritize bills. Mortgage and rent are among the essential ones and so are utilities like heat, water, and phone line. Child care, car payments and anything that allows you to work count as well. Cable TV does not.
Then again, paying your mortgage with a credit card may be something you should do if the lender threatens to foreclose. This process may take as little as 3 to 4 months, ending with the loss of your home. The further along the process of foreclosure gets, the more you will have to pay in collection costs and fees in order to get your home back.
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