How to Use a Line of Credit to Pay Off Your Mortgage

Using a line of credit to pay off your mortgage works like any other cross-application of credit. Depending on your lender, you can set up a direct transfer of balance or get funded and pay off the mortgage yourself.

Instructions

1

Confirm that the terms of your line of credit are advantageous in comparison to the terms of your mortgage. Consider most seriously interest rates and term of payment. In many cases, the line of credit terms will be a much worse deal than your mortgage.

2

Ask the lender for your line of credit if they arrange direct balance transfers. This means they pay your mortgage off directly and add the cost to the balance of your loan. Also ask what the fee for doing this is. Many lines of credit will incur balance transfer fees of up to 6 percent, which is a lot when it comes to a mortgage.

3

Choose direct funding if your line of credit lender won't directly transfer balances or charges too high a fee. Arrange to make a withdrawal of the balance on your mortgage. Depending on your line of credit, you will do this through a service check or via a direct deposit to a bank account you designate.

4

Wait for funding to hit your checking account, whether that funding comes from a direct deposit or the clearing of your service check.

5

Write a check out to your mortgage company or use automatic bill pay for the balance of your mortgage. If you can deliver this check in person, for example at a bank office, you may want to do so.