The collateral damage from the bursting of the mortgage bubble is starting to become significant. Too many people took out mortgages on overpriced homes that they could not afford. Now that the "teaser" mortgage payments are resetting, many consumers are not able to afford the real mortgage payment, and are unable to refinance. An alarming trend is people who use their credit cards to pay a mortgage payment.

The amount of people who are having problems paying their mortgages is growing exponentially. For the month of September, 2007, in Orange County, California, mortgage defaults are up 469% over last year. While that's only 444 total houses, that is a shocking statistical increase that appears to be getting worse across the country. Some neighborhoods in Santa Ana have whole streets in default, as these working class people bit off more then they could chew. Clearly there is a problem brewing and it is only going to get worse.

Many people took out mortgages on the false assumption their overpriced home would keep on appreciating. They took out mortgages with payments that just covered the interest payments, or in some cases, were less than the interest payments. They got caught up in the excitement, convinced that the future value of the home would increase enough to keep refinancing every few years to keep the payments low.

Now that the spigot to the inflated equity in real estate has run dry, reality has set in, and more and more people are turning to their credit cards to live and pay the bills. Some of those people are actually using their credit cards to pay all or part of their mortgage payments. In some extreme cases, people are even missing their mortgage payments all together, and just paying the credit cards.

While it's impossible to for the author to know exact percentages of people who have paid their mortgages with a credit card, a recent poll in Scotland revealed 3% of those polled had paid their mortgage with their credit card in the last year. People in the United Kingdom actually have surpassed the USA in per capita consumer debt. That percentage should be similar to the amount of desperate homeowners in the USA who are having problems paying their mortgage debt.

Using your credit cards to pay your mortgage is not in your best interests. You are going further into debt by borrowing money at 10-34% interest, to pay off another debt that has 5-15% interest already. Now you are paying interest on your interest and it is the start of a vicious cycle where you use your money to pay the off the credit cards each month, and there is no money left over. Then, you have to use the credit cards to buy food and other necessities, and the cycle continues to snowball.

If you take out cash advances to pay your mortgage, you are digging yourself even deeper in debt, as the cash advance rate is usually over 22-24%. The policy of most card issuers is that you will not start paying the cash advance portion of the balance down until you have paid off the amount of debt that was "charged." Which means for every month you don't pay off the charged debt, your cash advance portion of the debt racks up high interest rates, and not one penny of your payment is paying it down.

If you are paying your mortgage in full or part with your credit cards, you are flirting with disaster, and you should re-evaluate your situation. While it has become very difficult for some people to find someone to refinance their mortgage, your original lender might have some programs that could help you. They don't want you to default, and usually they will help you to stay in the house if you can afford it.

If you can't afford your mortgage payments, you might want to talk to an attorney about the ramifications of just walking away from the house, or a short sale. If you think you can make your mortgage payments if only the credit card debt and their monthly payments were less, you might be a candidate for Debt Settlement.

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