The first crypto mortgages are already being granted. In Miami, it is already possible to buy a 30-year house by paying in bitcoins. Since the end of last year, the fintech company Milo has offered the possibility of mortgaging with cryptocurrencies, for the time being only with Bitcoin.
The demand for crypto mortgages is there. This new type of mortgage is being well received, where there is already a waiting list of 6,000 people who want to buy a property and make their monthly payments in cryptocurrencies.
“We realized that there were international clients with interesting cryptocurrency assets who had a hard time qualifying for a conventional mortgage loan,” explains Josip Rupena, founder of Milo and a former Morgan Stanley and Goldman Sachs employee. That is to say, there are many people with large fortunes in cryptocurrencies who cannot use them to buy homes and this company is giving them an option.
Interest of 5.95% at 30 years. These mortgages are being offered with interest rates between 5 and 7%. According to the example on their website, for a million-dollar home purchase, a mortgage is offered at 5.95% interest over 30 years, although they promise rates from 3.95%. The mortgage can be closed within a period of between two and three weeks, covering 100% of the amount and without any initial payment.
The trick: 100% of the amount requested in cryptocurrencies is required. These mortgages have a very specific audience: cryptocurrency investors who have large fortunes and are looking for a way to convert them into physical assets. Perhaps that is why the requirements are so crazy, compared to a traditional mortgage. And it is that Milo requires having as many cryptocurrencies as the mortgage loan. That is, if we are going to buy a million-dollar apartment, it will be requested to have funds in bitcoins equivalent to at least one million dollars. Of course, with the current value of bitcoin at the time the investment is made.
everything stays at home. The buyer “does not have to sell their cryptocurrencies and then see, over the years, how their value rises,” explain the creators of this crypto mortgage. The basic idea is that everything is organized from the cryptocurrencies themselves, without the need to make an intermediate change. At this time, Milo only accepts buyers from the United States. In Miami, where his reach, Francis Suarez, is a big proponent of cryptocurrencies, these crypto mortgages have been hailed as a “groundbreaking achievement.”
It’s the volatility, stupid. Paraphrasing the famous motto, the problem with these mortgages lies in the high volatility of cryptocurrencies. Fortunately, Milo at least only allows you to request them with bitcoins. The point is that if Bitcoin goes down in value, the company will go bankrupt and leave a trail of losses. On the other hand, if Bitcoin shoots up, that floor will cost a lot. Taking into account the huge change in the value of bitcoin in recent years, in 30 years the picture may be very different.
Memories of the subprime mortgage crisis. The warning comes from Paul Krugman, Nobel Laureate in Economics. In a column in the New York Times, he warns that a bubble is brewing with cryptocurrencies that could lead to something similar to the 2008 crisis with subprime mortgages. One of the arguments used is not so much with the cryptocurrencies themselves, but with the lack of knowledge of how financial products based on them work. Many did not understand then “what they were getting into”, something that, according to Krugman, is happening again.
In Xataka | Bitcoin, blockchain and cryptocurrencies, explained in a simple way (and in video)
George is Digismak’s reported cum editor with 13 years of experience in Journalism