Paying a Home Loan with a Credit Card

Overview

What is a home loan?

This is when a mortgage is lent to you in a lump sum to pay for a property. This loan is legally bound to the property by the attorneys who register your home loan. You then have to pay back this home loan over a given length of time. This is usually in the form of monthly repayments. 

In South Africa, changes made to the National Credit Act have meant that lenders are tightening their credit policies. Individuals who are fortunate enough to qualify for a home loan are a chosen few who can afford to make repayments.

Paying a home loan is an endeavour that requires an individual to make quite a number of financial sacrifices. Individuals are often given an opportunity to repay the loan over an agreed upon repayment period. In South Africa, this could be 5 to 30 years.

Is there an option for paying a home loan with a credit card?

A major drawcard for individuals who are considering paying a home loan off with a credit card is the chance of benefiting from being able to maximise your points, getting cash back or frequent flier miles you earn from your card.

A major factor that came up during the credit crunch of 2008 has been the payment option of using a credit card for paying your home loan off. This was probably offered because people couldn’t keep up with their mortgage payments.

In the South African market, most mortgage servicers usually do not allow borrowers to make direct payments via credit card.

What are the disadvantages?

Interest rates charged on home loans are generally a lot lower than the rates you will pay for a credit card. So you may actually end up paying more.

Contact your home loan provider and your credit card provider to find out what your options are.