Is it ever a good idea to pay off a mortgage with a credit card?

Paying off a mortgage with a credit card has often been seen as a sign of a short term focus and is often seen as an early warning sign for serious money problems.  However with balance transfers there may be some sense with at least assigning some of the mortgage to lower interest credit card debt – but only when it is lower interest.

The problem that people have with paying off mortgages with credit cards is that there is a big difference in interest rates between standard mortgages and standard credit cards.  Credit cards are fundamentally a more expensive way of loaning people money, and this is reflected in the prices charged.  Mortgages, unlike credit cards, are secured against a house so the home loan lender is very likely to get their money back if the borrower defaults and the borrower is less likely to default as they will give the mortgage repayments a higher priority than they would to unsecured debts.

However low interest balance transfer deals can make it plausible to transfer some of the money from a home loan to a credit card, and over the lifetime of a loan save thousands of dollars.  However this approach will not suit everyone.

The mortgage needs to be a flexible loan that can be overpaid without any penalty.  It also either needs the ability to borrow against the value of the house or the ability to make redraws of overpayments without any penalty or fee.  If there are penalties or fees that are chargeable then this can quite quickly make this arrangement uneconomic.

There are many credit cards that offer low or even zero balance transfer interest rates.  These will allow a person to transfer a balance from one credit card to another.  They very rarely allow a transfer from another kind of personal debt to a credit card.  After a certain amount of time then they default back to another credit card rate and then the borrower needs to find another low interest loan.

If the borrower makes a mortgage over payment on the credit card and then transfers the balance of the credit card to a low interest credit card then the savings on the mortgage rate can be substantial, particularly over time.  The borrower needs to ensure that the card will not treat a mortgage overpayment as a cash advance.