How to buy a home with a crypto-backed loan

Key takeaways

Crypto-backed mortgages are a watershed moment in real estate financing because they let you use digital assets such as Bitcoin (BTC) or Ether (ETH) as collateral for a home loan.

Instead of selling your cryptocurrency, you pledge it to secure funds for buying property. This approach has been gaining traction as more people explore alternatives to traditional financing.

Furthermore, as the adoption of cryptocurrencies grows, crypto-backed mortgages are positioning themselves as a bridge betweendecentralized finance (DeFi)and traditional property markets, offering a unique solution for crypto holders looking to diversify their investments without forfeiting their digital wealth.

What are crypto-backed mortgages?

Crypto-backed mortgages are home loans where digital assets are used as collateral instead of cash or traditional assets.

Surprisingly, the process is straightforward: You transfer your cryptocurrency to a lender, who locks it up as collateral. In return, they provide a loan, often in fiat currency, to finance your property purchase. As long as you make timely payments, your crypto stays intact.

If the value of your collateral drops due to market volatility, you might need to add more assets to maintain the loan’s security — this is called a margin call.

Blockchain technologymakes this system transparent and efficient. Smart contracts, for example, automate much of the loan process, reducing paperwork and speeding up approvals. The blockchain’s immutable nature ensures every transaction is secure and verifiable, building trust between lenders and borrowers.

Crypto-backed mortgages are still emerging, but various platforms have already entered the market, offering tailored solutions for crypto investors.

As the adoption of blockchain in real estate grows, this innovative financing model is becoming more and more attractive.

Did you know?In 2012, BTCJam launched as one of the earliest platforms facilitating Bitcoin-backed loans, enabling individuals worldwide to borrow funds using Bitcoin as collateral. By 2016, BTCJam had serviced over 16,000 loans across more than 120 countries, with the average loan size ranging from $400 to $600.

The crypto-backed mortgage process

Navigating a crypto-backed mortgage involves several key steps:

Given thevolatile nature of cryptocurrencies, lenders monitor the value of your collateral. If its value drops below a certain threshold, you may face a margin call, requiring you to add more collateral or risk liquidation of your assets.

Did you know?When a homeowner fails to make mortgage payments, the lender may initiate a foreclosure to recover the outstanding loan balance. This legal process allows the lender to take ownership of the property and sell it to recoup losses.

Advantages of crypto-backed mortgages

Did you know?Mississippi has one of the lowest mortgage approval rates in the US, with only 52.14% of applications approved between 2018 and 2022. This low approval rate is influenced by factors such as higher poverty levels, lower median incomes and elevated debt-to-income ratios among applicants. Additionally, racial disparities persist, with Black applicants facing higher denial rates compared to white applicants.

Risks and considerations

Despite the advantages, there are some risks you should be aware of:

Where can you leverage your crypto assets for real estate financing?

Several platforms already offer crypto-backed mortgages, allowing you to leverage your digital assets to purchase real estate. Here are some options:

Key considerations

By carefully evaluating these factors, you can choose a reputable and secure platform that suits your needs for obtaining a crypto-backed mortgage.

Wishing you joyful house hunting!