Some entrepreneurs decide to rent space for their business and decide to buy their own. Being the owner of your own commercial space has great advantages. But obviously this means that they will have to start paying a commercial mortgage on the property.
Unfortunately, there may be some business owners who are starting to have a hard time paying their mortgage. Some try to “defer” their payments by moving the debt onto a credit card. And while this may seem like an effective measure, it’s really not such a good idea.
In this article, we’ll go over this and other payment options for when you can’t keep up with your mortgage payments.
What happens if you don’t pay your mortgage?
Before you start, you should know what happens if you don’t pay your mortgage.
When you don’t make your mortgage payments on time, the lender who sold you the property will file a notice of default. If you still do not receive payment, you will begin to lien the property and prepare to auction or resell it.
In short, not only will you be evicted from your office, you may also face legal problems. That’s why it’s so important to always make your mortgage payments on time.
Now that we know the importance of making your mortgage payments on time, let’s discuss making them with a credit card.
Can you pay a mortgage with a credit card?
The logic of using a credit card is that you would be “deferring” the payment. This means your mortgage payments would show up as made on time and you could pay off your credit card bill later.
Sounds like a good idea, right? But this alternative has more disadvantages than advantages.
Why you shouldn’t pay your mortgage with a credit card
There are a few things to keep in mind when doing this:
Not always an optionSome lenders will not allow you to pay your loan with a credit card, others require a very complicated process for you to use your credit card.
It is not always financially lucrative
A credit card debt will cost you much more money than a mortgage. This is because most credit cards have very high interest rates, so transferring your debt to your credit card will usually cost you a lot more money in the long run.
Transfer fees
Most lenders and banks will issue transfer fees for those who try to use your credit card to pay mortgages or loans. This will also make you lose more money than traditionally paying the mortgage.
You will not reduce your debt
The reality of using your credit card to pay a mortgage is that you are not really paying anything. You’ll still have the same debt (if not more) and you’re no closer to paying it off.
Late payments are usually a symptom of a bigger problem, and what you need to do is fix that other problem.
How to pay a mortgage
We have already shown the disadvantages of using a credit card to pay a mortgage, but we also want to talk to you about other options that could be a better alternative.
Borrow from your retirement account
While this is an option, it is one that needs careful consideration and one that you might even consider only as a last resort.
You might view this option as simply borrowing your own money to make your mortgage payments. However, there are some things you should take into account.
The first is that you may have to pay a penalty for withdrawing money early, and you may also have to pay taxes on the amount you withdraw.
You may also have to repay the amount withdrawn.
While this may be a last resort, be sure to consult a financial advisor so you’re sure there won’t be any tax penalties or damage to your retirement account.
Extend the payment term
One way to lower your mortgage payments is to simply extend the payment term. This means that instead of making payments for 15, it would now be for 30 years, for example. This will reduce the amount of money in each monthly payment and make them more manageable.
Most lenders offer to make this change for a fee of $250.
The clear drawback is that it will take you much longer to own the property and you will be in debt to the bank for longer than expected. However, if you have to decide between a longer term or having the bank repossess your property, an extension is definitely the best option.
Refinancing your mortgage
In some cases, you can refinance your mortgage for lower interest rates and lower payments without having to extend the payment term.
This is usually a good option, even if you don’t have a problem keeping up with your payments. After all, who wouldn’t want lower payments? The key here is that your credit score must be high enough to get better interest. If your credit score is low, this will not be a viable option.
Rent a part of your property
Another option that many business owners do not consider is that they can rent a part of their property to earn money to pay the mortgage.
The biggest problem is that this can be a bit time consuming and tedious. You’ll likely need to research potential tenants and make sure your space is up to the task, plus you’ll need to take the time to research potential clients who may use your space.
This will often mean more work for you, but it may be worth it if it means avoiding problems with the bank.
There are always options to meet your mortgage payments
We hope this article has given you some of the options you may not have considered before. Hopefully, you’ll never find yourself in this situation, but if you ever have trouble paying your mortgage, you’ll know what your options are.