There are some people who mention that it is possible to pay your mortgage with a credit card. The main argument made for this method of paying is that banks require substantial deposits before they will consider lending you the money you need. If you have already paid for the deposit yourself, then theoretically you can use your credit card to cover the rest of the purchase price. This way, when you make payments on the loan, you are paying off part of what was deposited before and not using all your available credit limit.
However, there are too many unanswered questions regarding this idea to make it an entirely plausible answer to homeownership problems at this time. For example, it isn’t clear whether a bank will be receptive to this method of paying off a mortgage. Before giving out a loan, banks require large deposits as a sign that the lender is comfortable with you and that you aren’t going to default on your loan.
As such, if you are essentially creating your own deposit with a credit card, then this might not seem like a sound method of paying off your home. If a lender doesn’t see the funds in an account or have other verification as to how you acquired it, they will probably not be very happy about it.]
Another issue is with the installment payments you will have requirement to make. This is assuming your credit card carries a high enough interest rate for it to be a good fit for this purpose. Because credit cards charge between 20 and 24 percent interest, you would need to be paying off the loan at a faster rate than this from month to month in order to make this plan work out. The other issue with these installment payments is that if you are buying something like a home, there could be additional costs down the line when it comes time to fix up the property and make any necessary repairs. It is possible to lose money if you don’t keep enough of a deposit to cover these costs.
A home is more than just an investment for many people. It’s also the largest single financial expense most people will take on in their lifetime.Yes, there are some circumstances where it would be acceptable to pay off your mortgage with your credit card; however, this is not one of them. Therefore, before considering going down this path, be sure to talk with your lender and get their perspective on the situation so that you can get a clearer idea of how things will work out in the end.
Bottom line
It appears that the author is correct in his assessment of what will happen when a person borrows money against their home. As much as I dislike to admit it, this is what will happen when one borrows against their home. In nearly every case, there will be damage to the equity in the home and property value will take a hit over time.
