Pay Your Mortgage With Your Credit Card?
2nd December 2007
Today’s Chicago Tribune points to a new web site, cardit.com, which allows consumers to pay their mortgage payment with a credit card. Cardit is set up with 100 lenders including the nations largest loan servicers. It charges a fee of $19.95 plus 2.49% of the mortgage payment every time someone uses the service.
Paying your 7% mortgage with an 18% credit card doesn’t seem like the best way to get ahead. In fact, if the only way to make your mortgage payment is by adding it on to your credit card, you are probably already in a world of trouble. Delaying a problem isn’t the same as solving it. When the time comes that you need to pay your credit card and you don’t have the cash for that, the local loan shark is not a good option either.
My take here at Illinois Mortgage Rates and News is that the timing for this service couldn’t be worse. At a time when property values are soft and foreclosures are spiking this is like throwing more gas on the fire.
Peter Thompson is illinois Mortgage Broker
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December 5th, 2007 at 9:31 pm
That is an ugly scenario.
But I’ll throw in a twist…
Let’s assume a homeowner has a 25,000 HELOC.
They are going under and they know it. Right now they are current.
If they sell with a short sale - the Lender can send them a 1099 for that 25,k deficiency judgment. They would count this as income and be taxed on it.
However, let’s just say the borrower pays off his HELOC, transferring the balance to his credit card.
Now he goes under. Short Sales the house. And the day after it closes he declares BK.
Since the debt of 25,k is unsecured, it can be dismissed in the BK.
Of course there are a thousand things wrong and unethical with this situation but I’m just saying “what if…?”
Just thinking.
December 5th, 2007 at 10:19 pm
Mike, nice twist. Maybe this service should be targeted toward bancruptcy lawyers.