In the past few years, cryptocurrencies were integrated into traditional financial tools such as automated teller machines (ATMs), loadable credit cards, point of sale devices and direct payments for all types of goods and services. Fidelity, a financial giant, has also added digital assets to its retirement account offerings. Recent developments have made it possible to use cryptocurrencies as collateral for a home loan or a down payment for a mortgage.
Conventional home loans that are crypto-backed
Banks require at least 20% down to buy a home using a conventional loan. People typically use cash to make a down payment or collateral. But, Americans can also use inventory, invoices and other real estate to get a traditional mortgage.
The median U.S. home price was $392,000. This means that a buyer would need $78,400 to secure a conventional loan from a bank. Although crypto assets can be used to load debit cards or pay for items through point-of-sale, not all banks allow the use of digital currencies to secure a crypto-backed loan.
There are currently a few companies that offer loans using crypto assets as collateral, or are working on it in the near future. Some firms that had planned to offer crypto-backed loans stopped short of the deadline.
United Wholesale Mortgage, the U.S.’s second largest mortgage lender, said that it would accept Bitcoin ( BTC ) for mortgages by the end of August 2021. A few months later, United Wholesale Mortgage announced that the company had decided to discontinue offering crypto services.
Mat Ishbia (CEO) of the company stated to CNBC in October 2021, that the lender didn’t think it was worthwhile. “Due to the current combination in incremental costs and regulatory uncertainty within the crypto space, we’ve concluded that we aren’t going beyond a pilot at the moment,” Ishbia told CNBC’s MacKenzie Sigalos.
Abra and Milo offer crypto-backed home loans
The cryptocurrency firm Abra, a financial service firm, just announced crypto-backed home loans. Bill Barhydt (ex-fixed income analyst at Goldman Sachs) founded the company in 2014. It has been providing digital asset trading services as well as a cryptocurrency wallet since more than seven years.
Abra has announced that it has partnered Propy so homebuyers can obtain a loan for their home using crypto collateral via the Abra Borrow platform . Abra’s lending application offers a range of interest rates depending on the amount of crypto collateral that is used. These rates can be as low as 0 up to 9.5%.
Abra CEO Bill Barhydt said that while digital asset investment has risen, most investors are not able to use their cryptocurrency holdings directly to fund the most important purchase of their lives, a house. The Abra executive stated that Propy’s partnership solves this problem and is a significant step in closing the gap between real estate and crypto.
Abra is not the only company offering cryptobacked mortgages to anyone interested in buying real estate. Milo, a Florida-based startup, raised $17million in a Series B funding round on March 9, 2022. M13 Venture Capital, a California-based venture capital firm, led the round. QED Investors was also involved. Metaprop was also present.
Borrowers looking to leverage upto $5 million can apply for Milo’s 30-year loans. Milo accepts stablecoins and bitcoin ( TTC), and ethereum( ETH). Interest rates range from 5.95% to 6.95% with two to three week closing times. Milo CEO JosipRupena stated that the company was aiming to make crypto participants possible when it raised $17million last March.
Rupena stated that the funding round was a confirmation of Milo’s vision to empower crypto and global consumers, and the chance to link the digital world to real-world assets. This is a multibillion dollar opportunity and we are proud that we are pioneering efforts in the U.S. to help consumers with unconventional wealth.
Ledn and Figure Technologies plan to offer crypto-backed mortgage products
Ledn , a crypto lender and savings platform, announced in December 2021 it was preparing to launch a bitcoin-backed mortgage product.
Ledn was established in 2018. The company has raised $103.9 million so far. Ledn’s Bitcoin-backed mortgage is currently not available. However, people can sign up to Ledn’s mortgage product waitlist.
Ledn’s mortgage webpage states that this loan combines the appreciation potential and the stability of real-estate prices. It is a first-of-its kind loan. You can use your bitcoin holdings to purchase a property or finance your home with the Bitcoin Mortgage. You can get a loan equal in value to your bitcoin holdings without having to sell a single satoshi.
Figure Technologies plans to offer a cryptobacked mortgage. People can sign up to a waitlist to get access to Figure’s new product. Mike Cagney , Figure’s cofounder, explained that the company was launching a mortgage program at the end March.
Cagney stated that Figure was launching a crypto-backed loan in April. We give you a mortgage of $5M with 100 percent LTV. You can put up $5M in Bitcoin or Ethereum. A 30-year mortgage is easy and painless. You can get any amount up to $20M without cash-out. Your crypto collateral can be used to make payments. We don’t rehypothecate crypto.
Although there aren’t many crypto-backed mortgage products available today, this trend will be more prominent in 2022. The trend of purchasing a home using bitcoin, along with its integration with ATMs and debit cards, will continue to grow.
