In recent years, cryptocurrencies have been integrated into traditional financial tools 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 issued by financial giants like Fidelity. In recent times, cryptocurrencies can be capitalized more for making a down payment on a mortgage or securing a conventional home loan using bitcoin as collateral.
Conventional Crypto Home Loans
These days, at least in the United States, banks require at least 20% down payment if an individual or couple wants to buy a home using a conventional loan. Typically, people use cash as collateral or a down payment, but Americans can also use things like business equipment, inventory, invoices, general liens, and even other forms of real estate to secure a traditional mortgage.
As of April 8, 2022, the median home price in the United States was $392,000, which means a buyer needs $78,400 in collateral to get a conventional bank loan. Although crypto assets can be used to load debit cards and pay for items through point-of-sale commerce, few businesses allow people to use digital devices for a crypto-backed loan.
However, there are currently a few companies that are offering loans that use crypto as collateral or are allowing to do so in the near future. Additionally, some companies that planned to offer crypto loans dropped the idea soon after.
For example, the second largest mortgage lender in the United States, United Wholesale Mortgage, announced that it would accept bitcoin (BTC) for mortgages at the end of August 2021. However, a few months later, United Wholesale Mortgage revealed that the company has decided not to offer crypto services.
Company CEO Mat Ishbia told CNBC in October 2021 that the lender shouldn’t be worth it. “Due to the current combination of additional costs and regulatory uncertainty in the crypto space, we have concluded that we are not going to proceed beyond a pilot project at this time,” Ishbia told MacKenzie Sigalos. from CNBC.
Crypto-backed home loans powered by Abra and Milo
Meanwhile, one financial services company that just announced crypto home loans is cryptocurrency company Abra. The company, founded in 2014 by former Goldman Sachs fixed income analyst Bill Barhydt, has been providing digital asset trading services and a cryptocurrency portfolio for more than seven years.
On April 28, 2022, Abra announced its partnership with the company Propy and home buyers can get a home loan using crypto as collateral through the Abra Borrow platform. The Abra loan app has different interest rates, depending on the amount of crypto collateral added, from 0 to 9.95%.
“While digital asset investing has exploded, most investors are unable to use their cryptocurrency holdings to directly fund the most important purchase of their lives, a home,” explained Abra CEO Bill Barhydt during the announcement. “Our partnership with Propy solves this problem and is a major step in bridging the gap between crypto and real estate,” the Abra executive added.
In addition to Abra, a company called Milo offers crypto mortgages to people who reward through the purchase of real estate. Milo is a Florida-based startup that raised $17 million on March 9, 2022, in a Series A funding round. California-based venture capital firm M13 led the funding round and QED Investors and Metaprop y participated.
Milo offers 30-year loans to borrowers looking to raise up to $5 million. Milo accepts stablecoins, bitcoin (BTC), ethereum (ETH) and interest rates ranging from 5.95% to 6.95%, with loans with closing times of 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 the opportunity to connect the digital world with real world real estate assets,” Rupena said at the time. “This is a multi-billion dollar opportunity, and we’re proud to be pioneering efforts in the United States for consumers with unconventional wealth.”
Ledn and Figure Technologies authorized to offer crypto mortgage products
Crypto lender and savings platform Ledn revealed in December 2021 that it was planning “the imminent launch of a bitcoin-backed mortgage product.” At the same time, the company said it 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 waitlist.
“By combining bitcoin’s appreciation potential with house price stability, this one-of-a-kind loan offers a balanced mix of wealth-building guarantees,” Ledn’s mortgage webpage reads. “With the Bitcoin mortgage, you can use your assets to buy a new property or finance the house you already own. Get a loan equal to your bitcoin holdings, without selling satoshi.
Figure Technologies also plans to provide a crypto mortgage and people can join a waiting list in order to access Figure’s next product. Figure co-founder Mike Cagney explained in late March that the company was launching the mortgage program.
“Figure is launching a crypto-backed mortgage in early April,” Cagney said at the time. “100% LTV – you put $5m in BTC or ETH, we give you a $5m mortgage. No painful process, no cash out, any amount up to $20 million, for a 30 year mortgage. You can make payments with your crypto collateral. And we do not re-mortgage your crypto.
Although there aren’t many crypto mortgage products today, the trend is starting to get a little bigger in 2022. If the trend continues, such as the integration of crypto with ATMs, cards debit and the myriad of traditional financial vehicles, the concept of buying a home with bitcoin is likely to become a mainstay of society.
What do you think of the concept of crypto mortgage products? Let us know what you think about this topic in the comments section below.
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