Acquiring a Home With Bitcoin — A Deep Dive Into the Latest Crypto-Backed Mortgage Trend

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Acquiring a Home With Bitcoin — A Deep Dive Into the Latest Crypto-Backed Mortgage Trend

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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 on 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 as of April 8, 2022. To secure a conventional bank loan, a buyer would need $78,400 in collateral. 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, America’s second largest mortgage lender, said it would accept bitcoin (BTC), for mortgages, at the end August 2021. United Wholesale Mortgage announced a few months later that it 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 are not going to extend beyond a single pilot at this point,” Ishbia told CNBC’s MacKenzie Sigalos.

Abra and Milo offer crypto-backed home loans

Abra, a cryptocurrency-backed financial services company, just announced that it has crypto-backed home loans. Bill Barhydt (ex-Goldman Sachs Fixed Income Analyst) founded the company in 2014. Since then, Abra has been providing digital asset trading services as well as a cryptocurrency wallet for more than seven years.

Abra announced its partnership with Propy on April 28, 2022. Homebuyers can now secure a loan for their home using crypto collateral via the Abraborrow platform. Abra’s lending application can have interest rates ranging from 0 to 9.5% depending on the amount of crypto collateral.

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.

Milo, an Australian company, offers crypto-backed mortgages to people who are interested in buying real estate. Milo, a Florida-based startup, raised $17 Million in a Series A round of funding on March 9, 2022. M13 Venture Capital, a California-based venture capital firm, led the round. QED Investors was also present. Metaprop was also involved.

Milo provides 30-year loans to borrowers who want to leverage up to $5,000,000. Milo accepts stablecoins (BTC), bitcoin (ETH) and ethereum(ETH). Interest rates range between 5.95% to 6.95% with loans that take two to three weeks to close. Milo raised $17 Million last March. Milo CEO JosipRupena stated that the company’s efforts are to allow crypto participants.

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 that it was preparing to launch a bitcoin-backed mortgage product.

Ledn was established in 2018, and has raised $103.9 million. Ledn’s Bitcoin-backed mortgage is currently not available. However, people can sign up to Ledn’s mortgage product waitlist.

Ledn’s mortgage website states that this loan is unique because it combines the appreciation potential and the stability of real-estate prices. You can use your bitcoin holdings to purchase a property or finance the home that you already own 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 crypto-backed 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 about to launch 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 deposit $5M in BTC and ETH. For a 30-year mortgage, there is no hassle, no cash out, and you can borrow any amount up to $20M. 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.