Purchasing a new home can be a tedious process with various rules and regulations to navigate, not to mention the large sums of money involved. However, with the introduction of cryptocurrency in the mainstream, a new option has emerged: crypto mortgages. Hold back your seat and learn about it all in this article about how you can buy a house using a crypto-backed loan.
What is a Crypto Mortgage?
A crypto mortgage is a loan that is backed by cryptocurrency, typically Bitcoin or Ethereum. The borrower pledges a certain amount of their digital assets as collateral for the loan, and the lender provides the funds to purchase the home. The loan is typically for a fixed term, such as 15 or 30 years, and the interest rate is based on the current value of the collateral.
How Does a Crypto Mortgage Work?
The process of getting a crypto mortgage is similar to that of a traditional mortgage, but there are a few key differences. The initial step is to locate a lender who provides cryptocurrency mortgages. These types of loans are still relatively new, so not all lenders will offer them. Once you have found a lender, you will need to provide documentation such as your income, credit score, and proof of employment.
The next step is to pledge your cryptocurrency as insurance for the loan. This typically involves transferring the digital assets to a secure, third-party custodian who holds them in trust for the lender. After that, the lender will evaluate the worth of the collateral and decide on the loan amount based on that evaluation.
After the loan is approved, the creditor will disburse the funds to buy the property. The borrower will then make regular payments, like a standard mortgage. At the end of the loan term, the borrower will have the option to pay off the remaining balance or refinance the loan.
Are there any benefits of buying a house using a Crypto backed loan?
Using a crypto mortgage to buy a home has several advantages, including:
- With a crypto mortgage, the borrower can use a variety of different types of cryptocurrencies as collateral, whereas traditional mortgages typically require cash or real estate.
- Since the value of the collateral is based on the current value of the cryptocurrency, the lender can approve the loan much faster than with a traditional mortgage.
- Because the collateral is based on the value of the cryptocurrency, the lender can offer lower interest rates than with a traditional mortgage.
How to Get a Crypto Mortgage?
If you're considering getting a crypto mortgage, the initial step is to locate a lender that provides them. As these types of loans are still relatively new, not all lenders will offer them. You can look up online for lenders who concentrate on crypto mortgages or seek recommendations from your real estate agent.
Once you have found a lender, you will need to provide documentation such as your income, credit score, and proof of employment. You will also need to pledge your cryptocurrency as collateral for the loan.
Crypto mortgages: where to find them
An exciting way for prospective homebuyers to leverage their digital assets to purchase a home. With the growing acceptance of cryptocurrency in the mainstream, more and more lenders are offering this type of loan option. The prominent lenders include the following.
- Milo, a Florida-based startup, is one of the first lenders to offer crypto mortgages in the United States. Milo specializes in mortgages for real estate investment purposes and offers 30-year loans of up to $5 million with rates ranging from 3.95% to 5.95%.
- Homes provides crypto-backed mortgages for those seeking to purchase real estate in Texas. They accept bitcoin, ether, USDC and other cryptocurrencies as surety to borrow up to $5 million for a 5.5% to 7.5% APR.
In addition to these two lenders, there are other institutions that have started offering crypto mortgages. The figure, a North Carolina-based lender, has released a wait list for crypto mortgage loans of up to $20 million.
Ledn, a Canada-based lender, offers bitcoin-backed loans in Canada and is planning to offer bitcoin mortgages to clients in Canada and the United States this year.
Conclusion
Crypto mortgages are an exciting new development that offers several benefits over traditional mortgages, including faster approval times, lower interest rates, and greater flexibility. If you are interested in purchasing a home and have cryptocurrency, a crypto mortgage may be a great option for you. However, keep in mind that the crypto market is extremely volatile, and the value of the collateral can fluctuate greatly in a short period of time.
