The Crypto Mortgage Disruption - Lending, Lenders, and Companies

Thinking about taking out a crypto mortgage for your next home purchase? Let's dive in and look at what lending is involved, and some of the top lenders and other companies in this new space are being disrupted.

Crypto mortgages let home buyers use their digital assets, like Bitcoin and Ethereum, as collateral. This way, investors can keep their digital assets while still benefiting from real estate development lenders or companies that are keen to accept cryptocurrencies as payment.

The growing role of digital currencies in the U.S. real estate market is exemplified by the recent rise of crypto mortgages. Property buyers and lenders are increasingly turning to cryptocurrencies to underpin deals for hard assets.

Crypto Mortgage vs Traditional Mortgage 

Lender Fannie Mae started allowing borrowers to use crypto for down payments on a house last year. Then there are buildings going up in Miami that are accepting crypto for deposits on new condos. NFTs are also becoming more involved in crypto mortgage transactions, such as titles and documentation. But these crypto mortgages still work in a similar way as traditional mortgages have in the past, so far.

One key distinction of a crypto mortgage is that the collateral is digital assets, such as Bitcoin. When taking out this type of mortgage, the crypto assets are examined to determine the loan amount. This is the primary factor in the decision since crypto mortgage lenders don't always require other documentation, like credit history or paycheck stubs. Although, it's still beneficial to have this information ready.

A benefit to mortgages with crypto assets is that you don’t have to cash out of your crypto investments to buy a house when life comes calling. This is important because selling your investments would incur capital gains taxes.

A crypto mortgage is a good fit for anyone who owns cryptocurrency and wants to use it as collateral to buy a house. Crypto mortgages have many benefits, such as not having to sell your investments to access the funds, and being able to use the equity in your home as collateral for other investments.

If you’re considering a crypto mortgage, make sure you compare offers from different lenders to find the best terms and conditions for you.

How Do Mortgages With Crypto Assets Work?

You have to put up an equivalent amount of your crypto assets as collateral for the loan after the lender decides on the loan's terms, how much you can borrow, and at what annual interest rate the loan will be at. If you're taking out a $350,000 loan, you would need to offer $350,000 worth of digital assets as collateral for example.

When the loan closes and the real estate is purchased, monthly installments using either traditional fiat currencies or selected cryptocurrencies are used to pay back the loan. We expect to see a wider range of offerings and accepted digital assets as the market grows and competition among lenders for homebuyer crypto assets increases over time.

Lenders and Companies Making Crypto Mortgages A Reality

Ledn

Ledn is planning to offer Bitcoin-backed loans and mortgages to clients in Canada and the U.S. By using Bitcoin as collateral, clients will be able to access more affordable loan products and tap into the equity of their homes without having to sell their assets. This will provide a much-needed financial boost to individuals and families who are looking to purchase a home or invest in their future.

Milo

Milo offers crypto-backed mortgages in the United States. The firm specializes in 30-year loans of up to $5 million for real estate investment purposes, with rates ranging from 3.95% to 5.95%. Milo doesn't require a down payment (the borrower can finance up to 100% of the property’s value), and it accepts collateral in Bitcoin, Ethereum, and a few Stablecoins such as USDC, USDT, and Gemini USD.

Figure

A lending service named Figure, which plans to accept Bitcoin and Ethereum as collateral, opened a waitlist for a crypto mortgage for loans of up to $20 million. It offers 30-year fixed-rate mortgages with monthly adjustments of collateral for an annual rate as low as 6%.

USDC.Homes

If you're looking to buy a home in Texas and would like to use cryptocurrency as collateral, USDC.Homes offers crypto mortgages that could be a perfect fit for you. Some of the digital assets they accept as collateral include Bitcoin, Ethereum, USDC, and a few others - which can then be used to borrow up to $5 million at an APR of 5.5% to 7.5% at the time of this writing. Plus, since the down payment is staked as well, borrowers can actually accrue interest on their collateral - offsetting a portion of the monthly mortgage payment in the process.

Things To Consider Before A Crypto Mortgage Application

Despite digital assets totaling around $2 trillion in value in the past decade, it's been difficult for lenders and financial companies to break into the mortgage industry for many years now, but disruption does seem to be continuing in this space. One of the main issues standing in the way is cryptocurrency volatility.

Bitcoin increased by 305% in 2020 but has since decreased by over 40% from its peak. But as market cycles continue the volatility will come to an end as the digital asset market matures.

Supporters of Bitcoin and other digital assets argue that cryptocurrency as an asset class will eventually prove its worth, as it has increased in value by almost 500% since 2019 and has been declared dead so many times that many have lost count.

But crypto continues to survive and grow even through global conflicts, financial meltdowns, and pandemics. With this said, the mortgage industry is likely ripe for continued disruption with crypto mortgage lending.