Mortgage Firm Now Lets Home Buyers Use Crypto As Collateral For Loans

April 28, 2022 3:18 pm

A mortgage firm in Miami is now letting home buyers use cryptocurrency as collateral  for home loans which is one of the first ever in the mortgage industry.

As a result, home buyers won’t even need to provide a down payment for the loan  and the mortgage will be able to loan up to a limit of $5 million.

The way it works is that the crypto will be held in a custodial wallet that will be secured for the duration of the loan and buyers will be expected to make monthly payments similar to traditional mortgages.

This benefits home owners as they will be able to take advantage of the increasing value of both their crypto holdings as well as the real estate property that they are buying.

DailyMail.co.uk reports:

But it also comes with increased risk using an already volatile asset to finance a purchase in the property market which may also face a slowdown in the coming months – just as borrowing costs go up.

The person selling the property receives dollars directly from Milo, while the homeowner is further allowed to make monthly mortgage payments in either crypto or cash.

Milo has safeguards in place to ensure they’re not left broke in the event of a shock plunge in the value of cryptocurrency.

If the value of the crypto collateral drops to below 65 per cent of the loan amount, the borrower will be asked to provide more crypto or cash.

And if the value of the currency drops below 30 per cent, Milo will immediately liquidate the Bitcoin or Ethereum and store that amount in traditional US dollars.

Home buyers in Miami are already taking advantage of this new mortgage offer and it has so far been observed that the interest rates of the mortgage 4% to 6% for the 30 year ones which is comparable to other options.

However, there are still many skeptics about the launch of this new type of loan given the market volatility of crypto still and that this would be a big risk for something like a home.

Others are saying that the benefits outweigh the risks as this would be a better financing option that allows one to keep his or her crypto assets while securing a loan.

This means that investors can avoid having to cash out and pay taxes which means they can continue to enjoy the upside of their investments.

Luno.com summarizes:

Miami-based mortgage firm Milo is allowing its customers to use cryptocurrency that they already hold as collateral for home loans without the need for a down payment.

The firm will allow borrowers up to $5 million a time on individual home loans. Instead of a downpayment, the borrowers pledge the entire value of the property in Bitcoin and Ethereum before transferring them to a custodian for safekeeping.

The buyer then makes regular monthly payments at similar rates offered for regular mortgages, with the stored crypto available to the lender should the borrower default.

Homeowners could stand to benefit on both fronts should the value of the property rise, alongside the value of their pledged cryptocurrency.

This new offering has proved popular, with the firm approving $340 million of mortgages in the last month alone.

If the mortgage industry sees this as a popular option and decides to provide more crypto-related loan financing options, it may mean even more capital being allocated to the crypto markets in the future.

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