In recent years, cryptocurrencies have been integrated into traditional financial instruments such as automated teller machines (ATMs), loadable debit cards, point-of-sale devices, and direct payments for all kinds of goods and services. Digital assets have also been added to retirement account offerings by financial giants like Fidelity. Recently, cryptocurrencies can be further capitalized to make a down payment on a mortgage or provide a traditional home loan using bitcoin as collateral.
Conventional Crypto Home Loans
These days, at least in the United States, banks require a minimum 20% down payment if a person or couple wants to buy a home using a traditional loan. Typically, people use cash as collateral or down payment, but Americans can also use things like commercial equipment, inventory, invoices, general liens, and even other types of real estate to secure a traditional mortgage.
As of April 8, 2022, the median home price in the United States was $392,000, meaning a buyer needs collateral of $78,400 to get a conventional bank loan. While crypto assets can be used to load debit cards and pay for items via point-of-sale trading, few businesses allow people to use digital currencies for a crypto-backed loan.
However, there are several companies offering loans that currently use crypto assets as collateral or plan to do so in the near future. Additionally, some companies that were planning to offer crypto loans soon gave up on the idea.
For example, United Wholesale Mortgage, the second largest mortgage lender in the United States, announced that it will accept bitcoin (BTC) for mortgage at the end of August 2021. But a few months later, United Wholesale Mortgage decided not to offer the company’s crypto services.
Company CEO Mat Ishbia told CNBC in October 2021 that the lender didn’t think it was worth it. MacKenzie Sigalos of CNBC.
Crypto-backed home loans powered by Abra and Milo
Meanwhile, a financial services company that has just announced crypto home loans is cryptocurrency firm Abra. Founded in 2014 by former Goldman Sachs fixed income analyst Bill Barhydt, the company has been providing digital asset trading services and a portfolio of cryptocurrencies for over seven years.
On April 28, 2022, Abra announced its partnership with the company Propy, and home buyers can get home loans using crypto as collateral through the Abra Borrow platform. Abra loan application has different interest rates between 0% and 9.95% depending on the amount of crypto collateral added.
“While digital asset investment has exploded, most investors are unable to use cryptocurrency to directly fund the most important purchase of their lives, a home,” Abra CEO Bill Barhydt said during the announcement. “Our partnership with Propy is solving this problem and is a big step forward in closing the gap between crypto and real estate,” said the Abra executive.
In addition to Abra, a company called Milo offers crypto mortgages to people interested in buying real estate. Milo is a Florida-based startup that raised $17 million in a Series A funding round on March 9, 2022. California-based venture capital firm M13 led the funding round and joined QED Investors and Metaprop y.
Milo offers 30-year loans to borrowers who want to raise up to $5 million. Milo accepts stablecoins, bitcoin (BTC), ethereum (ETH), and interest rates are between 5.95% and 6.95%, and the loan closing time is two to three weeks. When Milo raised $17 million last March, Milo CEO Josip Rupena said the company’s efforts were aimed at enabling crypto participants.
“This [funding] “The funding round is a validation of Milo’s vision to empower global and crypto consumers and an opportunity to connect the digital world with real-world real estate assets.” “This is a multi-billion dollar opportunity and we are proud to be leading efforts to address unusually wealthy consumers in the United States.”
Ledn and Figure Technologies plan to offer crypto mortgage products
Crypto lender and savings platform Ledn announced in December 2021 that it plans to “launch a bitcoin-backed mortgage product soon.” At the same time, the company said it had raised $70 million from a handful of well-known investors.
Ledn was founded in 2018 and the company has raised a total of $103.9 million to date. At the time of writing, Ledn’s bitcoin-backed mortgage is not yet available, but people can join the Ledn mortgage product waiting list.
“By combining Bitcoin’s appreciation potential with home price stability, this one-of-a-kind loan offers a balanced mix of wealth-building guarantees,” says Ledn’s mortgage webpage. “With a bitcoin mortgage, you can use your assets to buy a new property or finance the house you already own. Get a loan equal to the amount of bitcoins you own, without selling satoshi.
Figure Technologies also plans to provide a crypto mortgage, and people can join a waiting list to gain access to Figure’s next product. Figure co-founder Mike Cagney announced in late March that the company was launching its mortgage program.
“The Digit is launching a crypto-backed mortgage in early April,” Cagney said at the time. “100% LTV – If you put $5 million in BTC or ETH, we will give you a $5 million mortgage. No pain for a 30-year mortgage, no cash out, anything up to $20 million. You can pay with your crypto collateral. And we don’t re-mortgage your crypto.
While there aren’t many crypto mortgage products today, the trend is starting to grow a bit more in 2022. If the trend continues, such as the integration of crypto with ATMs, card cash machines and countless traditional financial instruments, buying a home with Bitcoin could become a pillar of society.
What do you think of the concept of crypto mortgage products? Let us know what you think about it in the comments section below.
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