Can You Use a Credit Card for a House Deposit?

Saving up for a house deposit can be a monumental challenge, especially with the rising cost of living in Australia. This has led some potential home buyers to explore creative (and sometimes risky) alternatives, such as using a credit card to cover their house deposit. But is this even possible? And more importantly, is it a good idea? 

This guide dives deep into the concept of using a credit card for a house deposit, explaining the potential benefits, risks, and everything you should consider before making this decision. We'll also touch on practical tips and alternative methods to fund your deposit more effectively.  

If you're a first-time homebuyer in Australia wondering about your options, this resource is here to empower you with credible, transparent information so you can make an informed choice. 

Note: This article provides general information only and does not constitute financial, credit, or legal advice. It has been prepared without considering your individual objectives, financial situation, or needs. Before acting on this information, consider whether it is appropriate for your circumstances and seek independent advice if necessary. 

Can You Pay a House Deposit with a Credit Card? 

The short answer is technically, yes, but it’s complicated and comes with significant caveats. While some lenders may allow you to use upfront funds from a credit card for a deposit, this is generally not encouraged. Many financial institutions require a mortgage deposit to come from “genuine savings,” which means money you’ve accumulated over time. 

Using a credit card as part of your deposit can raise red flags for lenders, as it may signal financial instability. Additionally, debt from a credit card could increase your debt-to-income ratio, which lenders carefully assess when deciding whether to approve your home loan application. 

Why Might Someone Consider a Credit Card for a House Deposit? 

• Lack of Savings: If savings fall short of the required deposit, relying on a credit card might seem like a temporary solution. 
• Urgency: If you’re in a time-sensitive situation where the opportunity to purchase a home might slip away, you may consider a credit card to bridge the gap quickly. 
• Leverage Rewards and Cashback: Some buyers might think about using a credit card to accumulate points, cashback, or other perks. However, this benefit is often outweighed by the accompanying risks and costs. 

Risks of Using a Credit Card for a House Deposit 

Before seriously considering a credit card for a house deposit, it’s crucial to understand the risks involved. 

1. Potential Loan Rejection 

Lenders typically prefer borrowers with stable finances and a strong history of savings. Using a credit card as part of your deposit may raise concerns about your financial responsibility, making them less likely to approve your loan. 

2. High-Interest Rates 

If you can't pay off the amount quickly, you'll incur high-interest rates on your credit card debt. This could add even more financial pressure when combined with the repayments on a new mortgage. 

3. Negative Impact on Credit Score 

A high balance on your credit card can hurt your credit utilisation ratio, which is an essential factor in determining your overall credit score. A lower credit score might affect your ability to negotiate favourable home loan terms. 

4. Increased Debt Levels 

Using a credit card increases your financial obligations. Mortgage lenders will calculate your total debt levels, and an additional credit card balance could reduce how much you're eligible to borrow. 

Are There Any Benefits? 

Although the risks are significant, there are a few benefits if this strategy is executed cautiously: 

• Convenience: Using a credit card provides more immediate access to funds. 
• Rewards: Some credit cards offer perks like cashback, travel points, or other rewards. However, these should not overshadow the financial risks. 
• Short-Term Solution: If you’re confident you can pay back the balance in full before it accrues interest, this approach might work as a temporary measure. 

Best Alternatives to Using a Credit Card 

While the risks of using a credit card for a deposit usually outweigh the benefits, there are safer alternatives worth considering: 

1. Save for a Larger Deposit 

Focus on consistent savings by cutting unnecessary expenses and creating a specific timeline for your financial goal. Resources like budgeting apps can help you track your progress. 

2. Family Guarantee or Help 

In some cases, family members might be willing to act as guarantors or provide financial assistance toward your deposit. 

Important: A family member acting as guarantor is financially responsible if you default. Their property or savings may be at risk, so this option should be considered carefully and with full legal advice. 

3. First Home Loan Deposit Scheme (FHLDS) 

Australian first-time buyers can consider options like the government-backed First Home Loan Deposit Scheme, which allows eligible buyers to purchase a home with a deposit as low as 5% while avoiding Lenders Mortgage Insurance (LMI). 

4. Low Deposit Home Loan 

Some banks and lenders offer low deposit loans requiring only 5–10% down. Do your research to find a suitable option. 

Note: If your deposit is less than 20%, most lenders will require you to pay Lenders Mortgage Insurance (LMI), which increases your overall borrowing costs. 

5. Personal Loans 

Although this also adds to your debt, a personal loan might be a better option than using a credit card. The fixed repayment schedule and lower interest rates can make it a more manageable choice. 

Learn More About How People with Low Credit Scores Can Access Financial Support.

Practical Steps to Take Before Considering a Credit Card for a Deposit 

If you’re still thinking about using a credit card for part of your deposit, follow these steps to minimise the risk: 

1. Compare Credit Cards: Look for credit cards with low interest rates, zero fees, or an extended interest-free period by using tools to compare credit cards, perks, and benefits like balance transfers. 
2. Understand Your Limits: Be realistic about how soon you can pay off the balance. Avoid stretching yourself too thin by taking on unmanageable debt. 
3. Consult a Financial Expert: Speak with a financial planner or mortgage broker to fully understand the implications of using a credit card for your home deposit. 

Read More on the Pros and Cons of Balance Transfers. 

Final Thoughts 

While using a credit card to pay for a house deposit is technically feasible in some circumstances, the financial risks generally outweigh the benefits. Most lenders prefer deposits funded by genuine savings, and taking on additional credit card debt may jeopardise your home loan application or financial stability. 

Instead of taking unnecessary risks, focus on more sustainable alternatives like low-deposit home loans, government schemes, or targeted savings strategies. If you're still unsure about your options and want tailored advice, reach out to financial experts or  you may consider using a comparison platform like Econnex to compare credit card offers with competitive rates and benefits. Always review terms independently before making a decision. 

By planning carefully and making informed decisions, you’re setting yourself up for success—not only in securing a mortgage but also in establishing long-term financial health. 

Disclaimer: The content provided is for informational purposes only and is based on publicly available information. While efforts are made to ensure accuracy, readers should verify all details with credit card providers or distributors. Econnex may earn a commission from selected providers when users switch plans via its platform. Not all plans or providers may be included in the comparison, and availability can vary by location. This blog does not constitute professional advice and should not be the sole basis for financial or energy decisions.