Acquiring a Home With Bitcoin — A Deep Dive Into the Latest Crypto-Backed Mortgage Trend
During the last few years, cryptocurrencies have been integrated into traditional finance tools like 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 further capitalized to put a down payment on a mortgage or get a conventional home loan using bitcoin as collateral.
Crypto-Backed Conventional Home Loans
These days, at least in the United States, banks require at least 20% down if a person or a couple wants to purchase a home by leveraging a conventional loan. Typically, people use cash for collateral or a down payment, but Americans can also utilize things like business equipment, inventory, invoices, blanket liens, and even other forms of real estate to secure a traditional mortgage.
As of April 8, 2022, the median home price in the U.S. was $392,000, which means a buyer needs $78,400 in collateral to secure a conventional bank loan. While crypto assets can be utilized to load debit cards and pay for items via point-of-sale commerce, there’s not many firms that allow people to use digital currencies for a crypto-backed loan.
However, there are a couple of companies right now, either offering loans that utilize crypto assets for collateral or that are planning to do so in the near future. Moreover, some firms that planned to offer crypto-backed loans gave up on the idea shortly after.
For instance, the second-largest mortgage lender in the U.S., United Wholesale Mortgage, announced it would accept bitcoin (BTC) for mortgages at the end of August 2021. However, a few months later, United Wholesale Mortgage revealed the company decided not to offer the crypto services.
The company’s CEO, Mat Ishbia, told CNBC in October 2021 that the lender did not think it was worth it. “Due to the current combination of incremental costs and regulatory uncertainty in the crypto space we’ve concluded we aren’t going to extend beyond a pilot at this time,” Ishbia explained to CNBC’s MacKenzie Sigalos.
Crypto-Backed Home Loans Provided by Abra and Milo
Meanwhile, a financial services firm that just recently announced crypto-backed home loans is the cryptocurrency firm Abra. The company, founded in 2014 by former Goldman Sachs fixed income analyst Bill Barhydt, has provided digital asset trading services and a cryptocurrency wallet for over seven years.
See related article: Types of Cryptocurrency Wallets
On April 28, 2022, Abra announced it has partnered with the company Propy and homebuyers can secure a home loan using crypto as collateral via the Abra Borrow platform. The Abra lending application has various interest rates, depending on how much crypto collateral is added, from 0 to 9.95%.
“While digital asset investment has skyrocketed, most investors are unable to use their cryptocurrency holdings to directly fund the most important purchase in their life, a home,” Abra’s CEO Bill Barhydt explained during the announcement. “Our partnership with Propy solves this 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 is offering crypto-backed mortgages for people interested in purchasing real estate. Milo is a Florida-based startup that raised $17 million on March 9, 2022, in a Series A funding round. The California-based venture capital firm M13 led the funding round and QED Investors and Metaprop participated.