In the past few years, cryptocurrency has been integrated in traditional financial tools such as automated teller machines, loadable debit cards and point-of-sale device. Additionally, direct payments have been made for various goods and services. Fidelity, a financial giant, has also added digital assets to its retirement accounts. Recent developments have made it possible to use cryptocurrencies as collateral for a home loan or a downpayment on a mortgage.
Hypo-Technical Conventional Loans
Banks require at least 20% down to buy a house using a conventional loan. While cash is the most common form of collateral, or down payment, Americans may also use inventory, business equipment and blanket liens to obtain a traditional mortgage.
The median U.S. home price was $392,000 as of April 8, 2022. To secure conventional bank loans, a buyer would need $78,400 to provide collateral. While crypto assets can be utilized to load debit cards and pay for items via point-of-sale commerce, there’s not many firms that allow people to use digital currencies for a crypto-backed loan.
However, there is a handful of companies offering crypto-backed loans right now. Some firms also abandoned plans to provide crypto-backed loans shortly afterwards.
United Wholesale Mortgage (the second largest mortgage lender in America), announced that it will accept Bitcoin (BTC) to finance mortgages by the end of August 2021. United Wholesale Mortgage, however, revealed that the company had decided not to provide crypto services a few months later.
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’ve concluded we aren’t going to extend beyond a pilot at this time,” Ishbia explained to CNBC’s MacKenzie Sigalos.
Abra and Milo offer crypto-backed home loans
Abra, a cryptocurrency-backed financial service firm just announced home loan crypto-backed loans. Bill Barhydt was a former Goldman Sachs fixed-income analyst and founded Abra in 2014. The company has offered digital asset trading services as well as a crypto wallet for seven years.
Abra, a company that has been partnering with Propy announced on April 28th 2022 that it had partnered. Homebuyers will be able to secure home loans using cryptocurrency as collateral through the Abra Borrow platform. Abra’s lending application can have interest rates ranging from 0 to 9.5% depending on the amount of crypto collateral.
“While digital asset investment has skyrocketed, most investors are unable to use their cryptocurrency holdings to directly fund the most important purchase in their life, a home,” Abra’s CEO Bill Barhydt explained during the announcement. “Our partnership with Propy solves this and is a major step in bridging the gap between crypto and real estate,” the Abra executive added.
Milo offers crypto-backed mortgages that are available to anyone interested in real estate purchases. Milo, an American startup, raised $17million in Series A funding on March 9, 2022. M13 Venture Capital, a California-based venture capital company led the round. QED Investors was also involved. Metaprop and Metaprop were also part of it.
Milo is able to offer 30-year loans up to $5,000,000 for those who are looking to increase their leverage. Milo will accept stablecoins and bitcoin (BTC), as well as ethereum and ETH. The interest rate is between 5.95%-6.95%. Loans are available with closing times of two to three weeks. When Milo raised $17 million last March, Milo CEO Josip Rupena said the company’s efforts aim to enable crypto participants.
“This [funding] round of financing is a validation of Milo’s vision to empower global and crypto consumers and the opportunity to bridge the digital world with real-world real estate assets,” Rupena said at the time. “This is a multibillion-dollar opportunity, and we are proud to be pioneering the efforts in the U.S. for consumers that have unconventional wealth.”
Ledn and Figure Technologies plan to offer crypto-backed mortgage products
The crypto lender and savings platform Ledn revealed in December 2021 that it was readying “the impending launch of a bitcoin-backed mortgage product.” At the same time, the firm said that it raised $70 million from a handful of well-known investors.
Ledn was established in 2018, and has raised $103.9 million. At the time of writing, Ledn’s bitcoin-backed mortgage is not yet available, but people can sign up for Ledn’s mortgage product waitlist.
“By combining the appreciation potential of bitcoin with the price stability of real estate, this first-of-its-kind loan offers a balanced blend of wealth-building collateral,” Ledn’s mortgage web page says. “With the Bitcoin Mortgage, you can use your holdings to buy a new property, or finance the home you already own. Get a loan equal to your bitcoin holdings, without selling a satoshi.”
Figure Technologies also plans to provide a crypto-backed mortgage and people can sign up for a waitlist in order to access Figure’s upcoming product. Figure’s co-founder Mike Cagney explained at the end of March that the company was launching the mortgage program.
“Figure is launching a crypto-backed mortgage in early April,” Cagney said at the time. “100% LTV – you put up $5M in BTC or ETH, we give you a $5M mortgage. There is no pain, cash-out and there are no fees. You can get a mortgage for 30 years with any amount, up to $20M. Your crypto collateral can be used to make payments. And we don’t rehypothecate your crypto.”
While there’s not that many crypto-backed mortgage products today, the trend is starting to become a bit more prominent in 2022. If the trend continues, like crypto’s integration with ATMs, debit cards, and the myriad of traditional financial vehicles, the concept of buying a home with bitcoin will likely become a mainstay in society.
How do you feel about crypto-backed mortgage products. Please comment below on your views.
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