Use credit card to assist in lowering home loan interest?

Hi,


I heard a lot of people talking about using a credit card to lower their home loan interest charge. It went along the line of putting the whole pay in the loan account and using a credit card to pay for your living costs.


does anyone know how this works?


thanks!



I think what you are talking about is having the credit card attached to your home loan.





Let's say you earn $2000 per month. Monthly mortgage payment is $800 ($600 interest, $200 principal). That leaves $1200 from your pay check that is also applied to your home's principal. You've applied about $1400 toward your home's principal. Now pay your bills with the credit cards. Any money you spend with the credit card is added to your home's principal balance. So, at the beginning of the month, your principal may have been reduced $1400 ($1200 about $200 principal from the $800 mortgage payment). As you pay your other bills, those charges are added back into your homes principal balance.





Any left over money at the end of the month is retained by the mortgage company and is applied to your home's principal (minus possible interest charges). If you don't spend more than the remaining principal for the month, your card is actually paid in full at the end of the month.




Hadn't heard that one. Most of these pay off your home mortgage faster deals involve a home equity loan. And, no, they don't work. The HELOC usually have higher interest rates. Makes no sense to pay a lower interest rate mortage with a higher interest rate HELOC.





The credit card idea makes even less sense.




It doesn't work. A credit card has an interest rate many times that of a mortgage.