This is a question that we get every now and then. As people look to pay their loan off and receive bonus points or rewards on their credit card. Its a great theory……. But here are the problems.
1) Most banks don’t allow payment to be made from a credit card facility.
2) This would be cash out on most (probably all) credit cards so you would be charged interest at the credit card cash out rate from day 1. Which is a much higher interest rate than the mortgage you pay. So you would need to work out if the rewards have a higher value than the extra interest paid.
Now that all said, some home loan providers have built products with this in mind. Generally they are for frequent flyer points. Once again you need to do the math on these as well. Lets say we have a choice between loan A (No rewards) and loan B (rewarded). If they are the same rate and have the same fees then yes loan B makes sense. But its rare for rewarded loans to be the cheapest out there in the market. So you would need to compare potential interest/fee savings vs the value of the rewards.
Investment properties can be approached in the same way. But the tax deductability of the loan helps offset the interest difference.
Confused? speak with us and lets see what the best option is for you.
