My Mortgage Experience
Why get a mortgage
Over the last couple weeks, I’ve been looking at getting a mortgage for a condo in Austin. Borrowing millions of dollars at ~3% is an incredibly attractive opportunity given that official inflation is 7% (likely much higher if we look at actual inflation). When you borrow at a rate lower than inflation you are essentially getting paid to take on debt.
Pretty wild what happens with reckless monetary policies.
Your crypto is worth nothing
I thought that with my income + business income + assets, I would be a slam dunk winner for a mortgage. Nope.
Mortgage underwriters only care about income, because they want to see stable cash flows being able to pay for the mortgage at a certain debt/income ratio. And if your income is from your business, they will only accept that after 2 years of tax returns.
Crypto assets are essentially worth nothing in the eyes of an underwriter, and cannot help you qualify for a mortgage. TL;DR - they don’t care about assets, they only care about income.
It’s wild to think of all the crypto millionaires who can’t get a mortgage!
Several companies noticed this pain point and have been building a new wave of “Bitcoin mortgages” which are innovative new ways to service this market. Below I cover how these work and who the companies are.
How it works
Bitcoiners and crypto holders are “Crypto flush” meaning that they have a ton of value stored in crypto.
And they are HODLers, which means they don’t ever want to sell (or at least not for a long time)
A Bitcoin mortgage allows you to both get a mortgage and HODL your coins.
Sounds too good to be true right? Here’s how it works:
The lender will take your Bitcoin and the property as collateral for the loan, which in this arrangement is typically 100% of the property value. No down payment is needed as the loan is “joint collateralized".”
This works well unless the price of Bitcoin drops dramatically. In that scenario, it is possible that you get margin called, which would force sell your Bitcoin + lose the house. When I reached out to the below companies, some hinted at very generous/relaxed margin call programs since the asset is joint collateralized, but we will have to see what the specifics are once they launch.
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So who provides this?
They were the first to come out with a Bitcoin mortgage. You can sign up for the waitlist here. A couple notes:
They’re first starting in Canada for Q1, then make it available to US clients in Q2
50% Loan-to-Value (of both assets)
If you already have a home you can apply for a mortgage too and if the home is not currently financed, the equity in your home can be used to purchase Bitcoin.
They’ve recently launched, and has many of the same features + a few more notes:
Milo is a direct lender, licensed, audited, and insured
Add or withdraw pledged crypto to adjust your rate (Ledn may also offer this but I wasn’t able to check)
Finance 100% of the purchase, no down payment needed
I’m excited to try these out soon! Will keep everyone posted if I do :)
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Need a fiat loan using your Bitcoin as collateral?
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