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Over the past few years, cryptocurrencies have been integrated into traditional financial tools such as automated teller machines (ATMs), loadable debit cards, POS devices and direct payments for all types of goods and services. Digital assets are also being added to retirement accounts issued by financial giants such as Fidelity. More recently, cryptocurrencies can be further capitalized to put a down payment on a mortgage or to take out a conventional mortgage secured by bitcoins.
Conventional mortgages secured by cryptocurrency
These days, at least in the U.S., banks require at least a 20% down payment if an individual or couple wants to purchase a home utilizing a conventional loan. Typically, people use cash as collateral or down payment, but Americans can also use business equipment, inventory, invoices, blanket liens, and other forms of real estate to secure a conventional mortgage.
As of April 8, 2022, the median U.S. home price was$392,000which means that a buyer would need $78,400 in collateral to secure a conventional bank loan. Crypto assets can be loaded with debit cards and utilized to pay for items through point-of-sale commerce, but not many companies allow people to use digital currency for crypto collateral loans.
However, there are a couple of companies that currently offer loans that use crypto assets as collateral or plan to do so in the near future. Additionally, several firms that had planned to offer crypto collateral loans gave up on the idea shortly after.
For example, United Wholesale Mortgage, the second largest mortgage lender in the United States, announced that it would accept bitcoin (BTC) for mortgages at the end of August 2021. However, a few months later, United Wholesale Mortgage revealedthat the company had decided not to offer crypto services.
The company’s CEO, Mat Ishbia, told CNBC in October 2021 that the lender did not think it was worth it.” Due to the current combination of incremental costs and regulatory uncertainty in the crypto space, we have come to the conclusion that we are not going to extend beyond the pilot at this time,” Ishbia explained to CNBC’s MacKenzie Sigalos.
Crypto-Backed Home Loans offered by Abra and Milo
Meanwhile, a financial services company that just recently announced crypto-backed mortgages is cryptocurrency companyAbra The company was founded in 2014 by former Goldman Sachs bond analyst Bill Verheit and has been providing digital asset trading services and cryptocurrency wallets for over seven years.
On April 28, 2022, Abra announced that it has partnered withcompanyPropyto enable homebuyers to secure crypto-backed mortgages via theAbra Borrow platform.. The Abra lending application has various interest rates ranging from 0 to 9.95%, depending on the amount of crypto collateral added.
“While digital asset investments are surging, most investors are unable to use their cryptocurrency holdings to directly fund the most important purchase of their lives, a home,” explained Abra CEO Bill Barhydt during the announcement.” The partnership with Propy is a big step forward in solving this and bridging the gap between crypto and real estate,” added the Abra executive.
In addition to Abra, a company calledMiloofferscrypto-backed mortgagesfor people interested in buying real estate; Milo is a Florida-based startup that will raise aMarch 9, 2022 Series A funding round of$17 million. California-based venture capital firm M13 led the funding round, with participation from QED Investors and Metaprop.
Milo offers 30-year loans for borrowers who want to leverage up to $5 million; Milo accepts stablecoins, Bitcoin (BTC), Ethereum (ETH), and interest rates from 5.95% to 6.95 and loans have a 2-3 week closing time. When Milo raised $17 million last March, Milo CEO Josip Rupena said the company’s efforts are aimed at enabling crypto participants.
“This (funding) round is a validation of Milo’s vision to empower global and crypto consumers and the opportunity to bridge real world real estate assets and the digital world.” Lupena said at the time.” This is a multi-billion dollar opportunity and we are proud to be pioneering efforts in the US for consumers with unconventional wealth.”
Ledn and Figure Technologies plan to offer crypto-backed mortgage products
Crypto lender and savings platform Ledn has revealed that it is preparing an “imminent launch of a Bitcoin-backed mortgage product” in December 2021. At the same time, the company said it had raised $70 million from a handful of high-profile investors.
Lednwas founded in 2018 and the company has raised a total of $103.9 million to date. At the time of this writing, Ledn’s bitcoin-backed mortgages are not yet available, but people can sign up for a waiting list for Ledn’s mortgage products.
“By combining the upside potential of bitcoin with the price stability of real estate, this first-time loan offers a balanced blend of wealth-building collateral.” Ledn’smortgage webpagesays this.” With a Bitcoin mortgage, you can use your holdings to buy new real estate or finance a home you already own. You can get a loan equal to your bitcoin holdings without selling your satoshi.”
Figure Technologiesalso plans to offercrypto-backed mortgagesand people can sign up on a waiting list to access Figure’s upcoming products. Figure co-founder Mike Cagneyexplainedthat the company will launch its mortgage program at the end of March.
“Figure will launch crypto-backed mortgages in early April.” Cagney stated at the time that ” 100% LTV – you put up $5M in. btcor. eth. We offer you a $5M mortgage. We offer you a 30 year mortgage for any amount up to $20M with no painful process and no cash out. You can make payments on your crypto collateral. And we will not remortgage your crypto.”
There are not many crypto-backed mortgage products available today, but this trend is becoming a bit more prominent in 2022, and if this trend continues, like the integration of crypto with ATMs, debit cards, and myriad traditional financial instruments, the house with bitcoin concept of buying a house with bitcoins will likely become mainstream in society.
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