In recent years, cryptocurrencies have been integrated into traditional financial tools such as ATMs, prepaid debit cards, point-of-sale devices, and even retirement accounts offered by giants like Fidelity. Now, digital assets are being used to make down payments or secure conventional mortgages by using crypto as collateral.
Crypto-Backed Conventional Mortgages
In the United States, banks typically require a 20% down payment for a conventional loan. As of April 8, 2022, the median home price was $392,000, meaning a buyer needs $78,400 in collateral. While crypto can be used for everyday purchases, few lenders accept it for mortgage purposes.
United Wholesale Mortgage, the second-largest U.S. mortgage lender, announced in August 2021 that it would accept Bitcoin for mortgages, but CEO Mat Ishbia later told CNBC that due to “incremental costs and regulatory uncertainty in the crypto space,” the company decided not to proceed beyond a pilot.
Abra and Milo’s Crypto-Backed Loan Offerings
On April 28, 2022, financial services firm Abra announced a partnership with Propy to allow homebuyers to secure loans using crypto as collateral through the Abra Borrow platform. Interest rates range from 0% to 9.95% depending on the collateral amount. CEO Bill Barhydt stated: “While digital asset investment has skyrocketed, most investors are unable to directly fund the most important purchase in their life—a home. Our partnership with Propy bridges the gap between crypto and real estate.”
Startup Milo raised $17 million in a Series A round led by M13 on March 9, 2022. It offers 30-year loans up to $5 million, accepting stablecoins, Bitcoin (BTC), and Ethereum (ETH) with interest rates between 5.95% and 6.95% and closing times of 2-3 weeks. CEO Josip Rupena called it “a multibillion-dollar opportunity to bridge the digital world with real-world real estate assets.”
Ledn and Figure Technologies Prepare Crypto-Backed Mortgages
Ledn, a crypto lender and savings platform, announced in December 2021 that it was preparing a Bitcoin-backed mortgage product, having raised $103.9 million to date. The product allows users to borrow against their Bitcoin holdings without selling any, and can be used to buy a new property or refinance an existing home.
Figure Technologies also plans to launch a crypto-backed mortgage. Co-founder Mike Cagney explained in late March 2022: “Figure is launching a crypto-backed mortgage in early April with 100% LTV. You put up $5M in BTC or ETH, we give you a $5M mortgage for 30 years. No painful process, no cash-out, and we don’t rehypothecate your crypto.”
Outlook and Challenges
While only a handful of companies currently offer crypto-backed mortgages, the trend is gaining traction in 2022. If it follows the path of crypto’s integration with ATMs, debit cards, and other financial vehicles, buying a home with Bitcoin could become mainstream. However, regulatory uncertainty and incremental costs remain significant hurdles.