Using Cryptocurrency To Purchase A New Home
3 Minute Read
I have been questioned recently about using cryptocurrency to purchase a home, so I began to dig and here is what I have found.
Currently it is fairly simple and basically mirrors traditional mortgages. I will touch on some of the differences below. Remember, this is still a new concept so I will keep this as short and digestible as possible.
To begin with the list for lenders on this type of transaction is not long. Currently there are only a handful of lenders that will work with borrowers nationwide, and some that only operate in particular states.
Loan amounts – Figure lending is currently lending up to 20 million for a home purchase while other lenders set their loan ceiling at 5 million.
Loan Rates – Rates on these loans can be fairly competitive. Milo is currently offering rates at or below traditional rates depending on a borrower’s qualifications. Lenders qualify borrowers based first on their cryptocurrency holdings. Lenders for this type of loan don't use FICO score, social security number (good for foreign investors) or current income to qualify borrowers for this type of mortgage like traditional lenders, but may ask for those items as well.
Loan Terms & Programs – Like traditional mortgage lenders, crypto lenders offer terms up to 30 years. There are also both fixed and adjustable rate programs available.
For this type of loan the borrower pledges all or a portion of their cryptocurrency holdings as the collateral for the loan generally equal to 100% of the home’s value.
Pro's:
- There is no need to cash out crypto holdings which would incur heavy tax costs. The currency is simply pledged as collateral for the loan.
- No credit score, social security number or proof of current income.
- Interest rates can be lower than traditional lenders
Con's:
- This is a high-risk investment due to the volatility of cryptocurrency, if the value of a borrower’s cryptocurrency pledged as collateral drops too low the lender may require additional crypto to be added to the borrowers collateral if the value of the collateral drops even lower the lender may "force sell" the borrowers assets that have been pledged (which would be equivalent to foreclosure).
- Borrower has no control over the cryptocurrency pledged as collateral for a home purchase regardless of use for trade or liquidation.
- Not all cryptocurrencies are accepted by lenders.
