Another company is testing the waters of cryptocurrency within the real estate lending realm as Miami-based digital bank Milo announced a new crypto mortgage product.
Touting “the world’s first crypto mortgage offering,” Milo said that its new loan will make it easier for investors in cryptocurrency to use their digital currency to buy real estate. The product has been in development since last year and is currently slated for an early 2022 debut. The company also said in a statement that it already has a large waitlist of clients who have been granted early access.
“The world is changing rapidly with how consumers make and invest their $2 trillion in crypto wealth,” said Josip Rupena, Milo CEO and founder. “Clients expect us to come up with innovative solutions to extend credit to millions of great consumers. The existing ways for crypto consumers to access home credit has left them with unintended tax liabilities of selling for a downpayment or worse — the opportunity cost of seeing their crypto increase in value.
“There are countless stories of people buying property with bitcoin proceeds only to see it increase in value and be worth millions more.”
Notably, United Wholesale Mortgage (UWM) explored the digital currency frontier last fall, announcing a pilot program in which it accepted crypto as payment for a mortgage. After taking a payment in September and five more in October, however, UWM announced that it was shutting down the pilot despite the successful transactions. It’s not known whether these bitcoins were converted into dollars after the payments were accepted or whether they remained as crypto and have appreciated (or depreciated) since.
Unlike that program in which a lender accepted cryptocurrency as payment, Milo’s program differs in that the crypto will instead be collateralized. Through Milo’s product, clients will be able to pledge their bitcoins as collateral to buy properties, allowing them to buy real estate while benefiting from the potential price appreciation of both their crypto assets and their real property. According to Milo, clients who do so will be able to finance their entire purchase this way with no dollar-based downpayments — and receive their funds faster than with a traditional mortgage.
It’s a buying strategy that carries innate risk. The Wall Street Journal reported in September that collateralizing crypto to buy big-ticket items such as cars and homes has grown in popularity. The inherent volatility of cryptocurrency, however, means that the value of pledged collateral can quickly go up or down. If collateralized digital currency grows in value, as Rupena described, the buyer indeed reaps the rewards. But if a cryptocurrency’s value plunges, a lender can issue a margin call, putting purchased real assets in jeopardy.
Such is life on the forefront of new technologies, and for shrewd and daring crypto investors, Milo’s bet on crypto-based mortgage lending could be big.
“This is an exciting time for the crypto and mortgage industries,” Rupena said. “With our new crypto mortgage, we can expand our offerings to consumers that were previously denied by other banking firms just for having crypto. We have an opportunity to make sure that doesn’t happen anymore and their bitcoin wealth can now help them buy a property.”