Crypto-Backed Mortgage: A First-of-Its-Kind Loan
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Tyler Hodgson, UMortgage’s executive vice president of growth and the man behind the deal, told HousingWire that this was the first crypto asset depletion loan he’s done. He arranged the loan through LendSure Mortgage after multiple lenders declined to consider the borrower’s crypto assets. The borrower lacked traditional income documentation but held important cryptocurrency reserves.
How it was structured
“We did an upfront preapproval on this loan. This guy is buying an $8 million house, so typically, they would go up to like 70% or 75% LTV on this product.But we hit the max loan amount, where they capped us out at $4 million. [we] got him approved using that cryptocurrency as an income source,” Hodgson said.
“Obviously, he’s liquidating some of the cryptocurrency for the down payment,” he added. “But you know,for these crypto investors with substantial funds … they could go buy the house [in] cash,but he’d rather leverage and borrow $4 million,and that’s another $4 million that he can leave invested for more gains and also delay paying capital gains tax on all of it.”
Under the structure, the borrower’s crypto holdings were used to qualify for the mortgage. This allowed the individual to purchase an $8 million property with a $4 million loan,leveraging their crypto assets rather of traditional income documentation.
Challenges and Lender Hesitation
Hodgson noted that securing this loan wasn’t easy. Multiple lenders initially rejected the idea of using cryptocurrency as a qualifying income source. LendSure Mortgage ultimately stepped in to facilitate the deal, recognizing the potential of this new approach.
Benefits for Crypto Investors
This type of loan offers several advantages for crypto investors. It allows them to utilize their digital assets to finance large purchases without selling them outright. This can be particularly appealing for those who anticipate further gains in the value of their cryptocurrency and want to defer capital gains taxes.
Future Implications
This loan represents a significant step towards the integration of cryptocurrency into the traditional financial system. As the crypto market matures and lenders become more cozy with digital assets, we can expect to see more innovative financing options emerge. This could open up homeownership to a wider range of investors and provide new opportunities for wealth building.
Key Takeaways
- This is the first known crypto asset depletion loan.
- The borrower qualified for a $4 million mortgage using cryptocurrency as an income source.
- The loan allows the borrower to leverage crypto assets without selling them.
- This deal highlights a growing acceptance of cryptocurrency in the mortgage industry.