How to Pay a Mortgage with a Credit Card

Paying a mortgage with a credit card might seem convenient, as you can  earn rewards or manage cash flow. While this option is common in other countries, it is usually not common in India. Most lenders do not allow this due to high transaction costs and regulatory guidelines.

Instead, banks and NBFCs allow you to opt for an auto-debit feature from your savings or salary account to ensure timely payments. You can also opt for indirect alternatives such as cash advances and loans against a credit card. Before using this option, you must understand the pros and cons to make a well-informed decision.

While your mortgage is generally deducted from your bank account, you can choose alternate options if your lender allows it. If you are wondering, how can I pay my mortgage with a credit card, here are some methods to do so:

 

• Auto-debit Payment

Typically, your mortgage or home loan EMI is paid through your bank or NBFC account. When you sign the loan agreement, lenders usually activate the auto-debit feature to automatically deduct the EMI from your account. To set up autopay for your mortgage, you can choose either your savings or salary account.

 

• Net Banking

To pay your mortgage through a credit card, you must first confirm if your lender accepts credit cards as a payment option. If they do so, you can make this payment through a credit card. Here are the steps: 

1. Login to your lender's online platform 

2. Go to the EMI payment option

3. Choose ‘credit card’ as payment option

4. Enter the EMI amount and enter your card details 

5. Confirm the transaction through PIN or One-time Password (OTP)

6. Save or download the transaction receipt for future reference

 

• Direct Payment via Credit Card

A credit card loan allows you to borrow against your credit card limit, providing you with access to funds that can be transferred to your bank account. Since your mortgage payments are auto-debited from your salary or savings account, adding the loan amount to your account can make the process more convenient. 

 

With sufficient funds in your account, your mortgage payments will be debited automatically each month. To do this, you must follow these steps:

• Check if your credit card company offers loans against your credit limit

• Apply and complete the required documentation process

• Once approved, receive the funds in your bank account

• Choose to have the funds sent to the account linked to your mortgage's auto-debit feature

• After the funds are transferred, your mortgage payments will be auto-debited each month, while you must repay the credit card loan on time

 

• Cash Advance 

Many lenders and credit card companies allow cash advance options for your credit card. Cash advance or cash withdrawal is the facility where you can withdraw funds from your credit card limit. Here are the steps for this payment method:

1. Check if your credit card issuer allows a cash advance feature

2. If yes, visit a nearby ATM that lets you withdraw through credit cards 

3. Withdraw funds from the ATM 

4. Physically visit the bank branch and get the amount/funds credited to your mortgage account 

5. After receiving funds in your account, your mortgage payment will confirm

 

Note that most credit card companies charge cash advance fees on cash withdrawals. Some issuers may offer cash advances free of charge for a limited period, after which the fees are applied. Before selecting this option, make sure to consider the cash advance fee and assess whether it is the right choice for you.

While mortgage or home loan EMI payments are typically set up through autopay, there are indirect options available, including using a credit card. However, this method carries several risks, such as additional fees, high interest rates, and potential impacts on your credit score.

 

• High Interest Rates

Credit cards generally have higher interest rates compared to other loan types. If you fail to pay the full amount by the due date, the interest continues to accumulate, increasing your overall debt. It is important to compare borrowing costs before choosing to use a credit card for mortgage payments.

 

• Additional Fees

Using a credit card to pay your mortgage can come with extra charges, such as cash advance fees and processing fees. Many banks and NBFCs impose these fees when you use a credit card for EMI payments. 

These fees can reduce the financial benefit and raise the overall cost of loan repayment. Some institutions may also include hidden charges, so it is crucial to read the fine print before opting for this payment method.

 

• Impact on Credit Score

Using a credit card for EMI payments or cash withdrawals can negatively affect your credit score. It influences your credit utilisation ratio, which is the amount of credit used compared to your available credit. A high ratio can lead to a reduction in your score, making it challenging to secure credit in future