Various financial tools, such as ATMs, point-of-sale devices, and debit cards have started incorporating cryptocurrencies into their operations in the past few years. Some companies, such as Fidelity, have also begun offering retirement accounts with digital assets. In addition, cryptocurrencies can now be used as collateral for home loans.
Banks typically require at least 20% down for a home loan in the US. However, people can still use various real estate and business equipment to secure a mortgage. In addition to cash, Americans can also use multiple forms of property such as land, inventory, and invoices.
Cryptocurrencies as home collateral
The median home price in the U.S. was $392,000 in April 2022. To secure a conventional bank loan, a buyer would need around $78,400 in collateral. While cryptocurrencies can be used to pay for goods and services at a point of sale, there are not many companies that accept them as collateral for mortgages.
Currently, a couple of companies are offering loans that use cryptocurrencies as their security. However, many of these companies gave up on the idea after failing to find sufficient qualified borrowers.
In August 2021, United Wholesale Mortgage, one of the country's largest mortgage lenders, announced that it would begin accepting Bitcoin as a form of security for its loans. However, a few months later, the company revealed that it had decided not to offer the service.
According to Mat Ishbia, United Wholesale Mortgage's CEO, the company decided not to offer cryptocurrencies as a security for its loans due to the rising costs and the lack of regulation. He noted that the company would not expand its pilot program.
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Crypto-backed home loans
A financial services firm known as Abra recently announced that it would start offering home loans backed by cryptocurrencies. The company was founded in 2014 by Bill Barhydt, a former investment banker at Goldman Sachs. Since then, it has been providing various financial services, such as digital asset trading and a cryptocurrency wallet.
On April 28, 2022, the company partnered with Propy to allow people to secure a home loan using cryptocurrencies as collateral. Through its platform, Abra Borrow, the company's mortgage application can offer various interest rates. For instance, it can offer a rate of 0 to 9.95%, depending on the added collateral.
Due to the rising popularity of cryptocurrencies, many investors cannot use their digital assets to fund the purchase of a home. This issue is a significant reason why the partnership between Abra and Propy was announced. Barhydt said that the partnership would help bridge the gap between real estate and digital assets.
Another company currently offering cryptocurrencies as a form of security for its loans is Milo, a startup based in Florida. It recently raised $17 million in a funding round. The company was led by M13, a venture capital firm based in California. Other investors included Metaprop and QED Investors.
For borrowers looking to take out a 30-year loan, Milo offers a variety of products, such as fixed-rate mortgages with a maximum of $5 million. It accepts various cryptocurrencies such as bitcoin (BTC), Ethereum (ETH), and stablecoins.
In March, Josip Rupena, the company's CEO, stated that the company's goal was to enable people to access the financial services industry through cryptocurrencies.
In November, Rupena said that the company's funding round validated the company's vision to help consumers and investors bridge the digital world with real estate. He noted that the company was proud to be the first mortgage lender in the US to accept cryptocurrencies as collateral.