Payoff Your Mortgage with a Credit Card

Posted by Madison on January 19, 2012

I love extreme, creative, personal finance. So when a reader, Joe, told me about his story on paying off not one, but two mortgages with credit cards at 0%, I couldn’t wait to share his story with you!

Payoff Your Mortgage with a Credit Card

Joe, who is 37 years old and married, says:

I’ve used zero-fee, zero percent balance transfer offers to pay off my last home and current home mortgage. In a nutshell, I took out roughly 40K in balance transfers (I knew I could cash flow these and pay them off before they came due) between 2 credit cards and applied that money towards my mortgage.

I was hooked, and couldn’t wait to hear more from Joe about it. He loves telling this story, so he was happy to share the details with us (thanks Joe!).

How to Payoff Your Mortgage with a Credit Card

Joe used the strategy twice. Here’s more on how Joe did it the most recent time with his current house:

  • Joe took out 2 no fee balance transfers, similar to the Discover More and Chase Slate offers* right now.
  • He paid off $38,598 of his 6% mortgage with the 2 credit cards (he used a Countrywide card and a Commerce card at the time), leaving $62,000 on his mortgage.
  • He then made payments to the credit cards, and because there was no longer interest on the balances, every payment went 100% to the principal.
  • He paid off the balances when the 0% rate expired.

*Find and compare all current credit card offers in our credit card directory.

Using a mortgage calculator, Joe determined that he saved over $20,000 in interest (at 6% over 15 years). Review current mortgage interest rates.

By using this strategy he was very focused on paying off the debt. Joe adds:

I think it helps you reach your goal quicker (paying off the mortgage) by giving you a set amount that needs to be paid off in a set amount of time…. If you don’t pay the credit cards off by the ‘deadline’, you’ll owe a large amount of interest.

Mortgage Payoff Tips

Extracting the money. When Joe used this strategy, he actually paid off his Countrywide mortgage with a Countrywide credit card (nice one Joe!). Since most credit cards prohibit paying off a loan at the same company, you can use the ways to extract money from balance transfers for ideas.

What about taxes? For those who want to argue with Joe about giving up his mortgage interest deduction, don’t worry he did the math for his situation. Joe found that when he carried his mortgage, he was only able to itemize about $14,000 per year, or $2,600 above the standard deduction in 2010, which meant he would save only $650 in taxes in 2010, much less than the amount of interest he was paying.

Remaining balance. Since Joe was able to eliminate a large portion of the mortgage balance with this strategy, he was also able to payoff the remainder much faster; more money was going to principal instead of interest with each remaining payment.

Available cards. If you are considering something similar, you can use the current credit card offers in our credit card directory at 0% to replicate Joe’s strategy.

More on Joe

Obviously, Joe has a lot of discipline when it comes to money. Here’s more on his background, spending habits, and credit card use now that he is debt free:

I don’t play credit cards much more or try to use 0% deals to my advantage. My identity was stolen in 2010, so I’ve tried to cut back on doing credit card deals. I did that Sapphire deal under my wife’s name…. We use two credit cards currently for rewards, and that’s it. Pay them off each month. We don’t buy anything, unless we can afford it, including our 2010 Altima we paid cash for (salvage title, but it was a steal and no body damage). My goal is to pay cash (or put on credit card and pay off every month) for everything from here on out – no more loans, whether it be a home, car or any other big ticket item.

Final Thoughts

Joe shares his final thoughts:

You should not employ this strategy unless you can guarantee you can pay off the balance transfers before the interest starts up (either by free cash flow every month or by investments you could liquidate if you got into a bind, like losing your job). If you cannot guarantee that, it likely is not worth the risk.

Thanks Joe, for sharing your story! It’s such a great one and I hope it inspires readers to think outside the box when it comes to personal finance!

Do you have a creative personal finance story you’d like to share? Let us know!

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Comments to Payoff Your Mortgage with a Credit Card

  1. That’s a pretty gutsy move but if it works, go for it. I just wonder if banks have any stipulations that they have to honor the interest rate or your credit limit. If not and they caught on to what was being done, they could ‘call’ the loan by lowering his limit or something like that. We just re-financed last year and have about 14.5 years left of payments, so unfortunately this isn’t a strategy for us to even consider right now 🙂

    Money Beagle

  2. That’s a good idea, but it requires a great deal of discipline and willingness to track your cards. It would have a much higher payoff in worse interest rate environments than what we have now. Since my mortgage is 4% and his was at 6% the difference in interest saved is large.

    slug |

  3. Nice..! this is a great idea if we have some surplus money to put into the mortgage..


  4. I used my AARP card (5% cashback on ALL purchases for 6 months) to may my mortgage via chargesmart. for paying $2500 towards my mortgage, i had to pay a fees of $68 so my total credit card transaction was for $2568 and i got a 5% cashback of $128.4.

    Net savings = ~$60
    hoping to do this for the next 5 months for a total of $300


  5. So you got $38,000+ in credit from those 2 credit cards when you applied? I have heard that they are notorious for not giving much credit.


  6. Hmm, I thought I wrote a reply yesterday. The brief version:

    1) You want to do this at the start of your mortgage because your payment actually goes toward your principal and not just interest. This point is somewhat stated in the article, but I wanted to make it more explicit.

    2) Thanks for the Discover More and Chase Slate options. Remember, you have to find the special link to get the FEE FREE balance transfer. They are out there, but you may not find them going directly to Chase or Discover.

    3) You may want to sign up for other Chase and/or Discover cards before you sign up for the FEE FREE cards three months later. Reason being is that Discover and Chase know the arbitrage opportunity and may not give you a big balance. This is factored in with your credit history and credit score. If for some reason, you get a low credit line, you can ask them to transfer your credit line from another Chase or Discover card. Then do the FEE FREE balance transfer. As I have read, they may only allow balance transfer from personal to personal cards and may not allow you to transfer from business cards to a personal card.


  7. I would like a more detailed explanation of the calculations.

    Using a very basic example lets say that Joe’s balance transfer period was one year. $40,000 divided by 12 is ~$3333 per month. When Joe says ” I knew I could free cash flow these and payoff before they came due”. Does that mean he had an extra $3,333 in his budget each month? If so that’s great for him but I don’t really see how I could take advantage of this approach without also having a substantial amount of extra cash in my budget.

    does that even if he didn’t do the balance transfer that he had enough extra cash in his budget to pay an extra $40,000 over the course


    • Ziggy,
      Usually the payments on balance transfers I have are 1-2%, so the monthly payment would start at about $400-$800 per month then go down from there.

      So Joe knew that he could probably squeeze an extra $800 per month from his budget.

      Let’s say he paid about $800 per month for 12 months. Then at the end of the year, his balance is $30400.

      Then at the end of the year, there are two options, if another balance transfer is available, you can transfer the $30k to another card(s) and continue paying off at the same pace.

      Or if another balance transfer isn’t available, you would liquidate $30k of savings/investments to pay off the balance transfer.

      So yes, you do need to assume that you could get your hands on the payoff money in some way if you can’t find another balance transfer.

      Having a backup plan of a way to get the cash is a critical piece of taking on this risk.

      I hope that helps!


  8. It’s all about risk. If you can afford the risk, I think this strategy is a good one. If you have an unstable job, then by all means, don’t do it!

    Mortgage Free Mike

  9. Were your Balance Transfer periods “until the loan is paid off”? If not I don’t understand how this works. Please explain more.


    • Craig,
      I’m not sure how long Joe’s balance transfer was good for.

      However, if you use one that is a limited time instead of until the loan is paid off, for example 18 months, then at the end of the 18 months, you can transfer the balance to another card at 0% or pay it off.


  10. You still have to pay off the Balance Transfer amounts usually much sooner than when your mortgage term was completed. Are you saying that Joe had enough extra money in his budget to be able to pay off $40,000 over the course of 1 or 2 years (the likely term for most Credit Card Balance Transfer Offers)?


    • Hi Maggee,

      See my response to Ziggy above. I think it will help!


  11. The article says:
    He paid off $38,598 of his 6% mortgage with the 2 credit cards (he used a Countrywide card and a Commerce card at the time), leaving $62,000 on his mortgage.

    This means he had 2 credit card payments and a regular mortgage payment.

    You also state in a reply:
    Usually the payments on balance transfers I have are 1-2%, so the monthly payment would start at about $400-$800 per month…

    This means Joe would have credit card payments of 400-800 (for the 38K) AND a regular mortgage payment for the 62K remaining.

    Rough numbers would be that Joe was making payments totaling at least 1000-2000 a month.

    This seems challenging to do in the 2012 economy.


  12. Hello

    Can you elaborate in more detail? I can’t seem to find out how you would do this?



  13. Nice Joe of course if you have a NH or State housing loan it would not work because they don’t offer credit card and only accepts check or money order.


    • Well, you see, you don’t “charge” it. You put the balance transfer $$$ into your checking account, and then you write a big fat check to your mortgage company with the notation that it is for “principal only.” Then the credit card company sends you a bill each month for 12 to 18 months for the $$$ you borrowed. You keep also making regular mortgage payments, because your payments stay the same for 15 or 30 years, but your principal has been reduced.


  14. I have done this a few times. I paid off a $30k HELOC by transferring $10k at a time to a 0% card. Pay as much as possible every two weeks and mark in big red letters on your calendar a month prior to the offer expiring so if there is still a balance it can be transferred to a new 0% card. Once it is paid off transfer another $10k.


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