Homebuyers in Canada and the U.S. are using credit cards to pay for closing costs, down payments, and home purchases [1].
This trend highlights the struggle of buyers to secure traditional mortgage funding or their desire to maximize financial incentives during a volatile market. While these methods provide immediate liquidity, they often come with high interest rates and strict lender limitations.
Some buyers utilize cash-advance features to cover the initial down payment [1]. Others focus on the rewards side of the equation, using specific credit cards to earn cash-back incentives on large payments. Some cards offer up to five percent cash-back when used during the home-buying process [2].
These strategies are emerging as a response to shifting market conditions. The national MLS Home Price Index has dropped more than 20% from its 2022 peak [3]. This decline has altered the landscape for both sellers and buyers, making some properties more accessible while tightening the requirements for traditional loans.
Financial experts said that using a credit card for a home purchase is often costly. Cash advances typically carry higher interest rates than standard mortgages and may not offer a grace period for repayment [1]. Furthermore, many sellers and mortgage lenders refuse to accept credit cards for the primary purchase price due to processing fees and risk factors [1].
Despite these hurdles, the appeal of rewards remains a draw. By routing closing costs, or other home-related expenses, through a rewards card, buyers can recoup a portion of their spending through cash-back programs [2]. This approach allows buyers to leverage credit-card issuer incentives to lower the overall cost of entry into the housing market.
“Credit cards can offer up to 5% cash-back when used to purchase a home.”
The shift toward using high-interest consumer credit for real estate indicates a widening gap between average incomes and housing requirements. While the drop in home prices since 2022 provides some relief, the reliance on credit card rewards and cash advances suggests that buyers are increasingly seeking non-traditional, and potentially risky, ways to enter the market.
