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. Fidelity, a financial giant, has also added digital assets to its retirement account offerings. Recent developments have allowed cryptocurrencies to be capitalized to make a downpayment on a mortgage, or obtain 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. While cash is the most common collateral, or down payment, banks require at least % down if a person or couple wants to purchase a home using a conventional loan. However, Americans can use business equipment, inventory, blanket liens, and other forms of real property 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. Although crypto assets can be used to load debit cards or pay for items through point-of-sale, not all banks allow customers to use them for crypto-backed loans.

There are currently a few companies that offer loans using crypto assets as collateral, or are looking to do so soon. Some firms that had planned to offer crypto-backed loans stopped short of the deadline.

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 in incremental costs and regulatory uncertainty within the crypto space, we’ve concluded that we aren’t going beyond a pilot at the moment,” Ishbia told 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.

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 but most investors are unable use their cryptocurrency holdings directly to fund the most important purchase of their lives, a house, Bill Barhydt, Abra’s CEO, explained the announcement. 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.

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.

Milo offers 30-year loans for borrowers looking to leverage up to $5 million. Milo accepts stablecoins, bitcoin (BTC), ethereum (ETH), and interest rates are between 5. 95% and 6. 95%, with loans that have two to three-week closing times. When Milo raised $17 million last March, Milo CEO Josip Rupena said the company’s efforts aim to enable crypto participants.

“This financing round [funding] is a validation for Milo’s vision of empowering global and crypto consumers, and the opportunity to connect the digital world and real-world assets,” Rupena stated at the time. This is a multibillion dollar opportunity and we are proud that we are pioneering efforts in the U.S. to support consumers with unconventional wealth

Ledn and Figure Technologies Plan to Offer Crypto-Backed Mortgage Products

The crypto lender and savings platform Ledn revealed in December 2021 that it was readying “the impending launch of a bitcoin-backed mortgage product.” At the same time, the firm said that 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. Ledn’s Bitcoin-backed Mortgage is currently not available. However, people can sign up to Ledn’s mortgage product waitlist.

“By combining the appreciation potential of bitcoin with the price stability of real estate, this first-of-its-kind loan offers a balanced blend of wealth-building collateral,” Ledn’s mortgage web page says. 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 satoshi .

Figure Technologies also plans to provide a crypto-backed mortgage and people can sign up for a waitlist in order to access Figure’s upcoming product. Figure’s co-founder Mike Cagney explained at the end of March that the company was launching the mortgage program.

“Figure will launch a crypto-backed mortgage early in April,” Cagney stated at the time. “100% LTV – you put up $5M in BTC or ETH, we give you a $5M mortgage. No painful process, no cash-out, any amount up to $20M, for a 30-year mortgage. Your crypto collateral can be used to make payments. We don’t rehypothecate crypto

While there’s not that many crypto-backed mortgage products today, the trend is starting to become a bit more prominent in 2022. The trend of purchasing a home with bitcoin is likely to continue, as crypto’s integration will be with ATMs, debit card, and other traditional financial instruments.

What do you think about the concept of crypto-backed mortgage products? Please comment below to let us know your thoughts on this topic.

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