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During 2017, Zac Prince did like most people and put in a loan application to buy a home with a Texas bank. His application included income from his cryptocurrency trading. Similar to thousands of other borrowers, Mr. Prince soon realized that if you trade cryptocurrency assets such as Bitcoin or Etherium for personal income, traditional lenders will reject your loan application.
This is how BlockFi started from an experience where demand was not being met. Other competitors saw the opportunity as well. Consumers are able to pledge their crypto assets as collateral to obtain a US dollar based loan.
Once the loan is paid off the borrower will receive their crypto assets back. It's pretty straightforward. Crypto backed lending is simply fulfilling a demand just like how non-qm loan programs utilize asset amortization and no tax return loans for home financing. With asset amortization loans, non-qm lenders use the value of person's stock investment portfolio to determine how much they will lend.
Buy a Home with Crypto Assets
When you're buying a home for the very first time it can be frustrating and challenging with all the documentation involved and lengthy verification process. In addition, you have a lot of important decisions to make along the way such as; should I get a fixed term of 30 years or 7 or 10 years? Should I include taxes and insurance in the loan payment? Do I want to pay more fees for a lower rate?
It doesn't matter if your goal is to use the funds for the down-payment or to buy the home outright. The option is now available to put your crypto assets to work for you. At the same time, you are not liquidating your digital assets so you won't lose the opportunity on any future increases in value or pay capital gains tax.
Financing a Home Remodel with Blockchain
When you've lived in your home for a long time, it's not uncommon for the homeowner to consider modernizing the home. The project can be major like adding three additional rooms or a second floor.
It can also be very simple by upgrading all the countertops in the kitchen and bathroom. Cryptocurrency investors are now able to fund these endeavors is a flexible method to stretch out the expense of remodeling over time. So where should one go for a crypto-backed loan?
BlockFi clients can get a loan up to 50 loan to value (LTV) on the home which means you still need to come up with 50% cash as a down payment. Whenever the LTV gets to 70 there will be a margin call where you need to cover the difference. If your crypto loan has a 5.5% interest rate, the monthly payments are interest only based on your loan amount. This makes the repayment terms very borrower friendly to pay off your loan. You are allowed to borrow against your Bitcoin (BTC), Ether (ETH), or Litecoin (LTC).
Salt Lending is a second major provider of loans collateralized by cryptocurrency and does business in a number of markets. Salt will allows eleven coins as collateral including BTC, BCH, DOGE, LTC, XRP, and ETH. Their website lets you choose your loan amount and it tells you the loan terms, rate, and LTV ratios up to 70 and a repayment period, from 3 to 36 months. Interest rates start from 5.95% APR and go up when your LTV choice does.
Another company in the same space, Nexo, enables you to get an instant credit line with your crypto currency held as collateral. Interest rates, APR starts from 5.9% and loans from $10 up to $2 million all with no credit or income check. Nexo allows up to 18 different crypto assets to be used including the most popular three. The terms are based on the value of your liquid assets.
In addition, the providers mentioned above allow borrowers to payoff the loan at any time. There are not any prepayment penalty fees. Cool, right? Apply today to see how a crypto-backed loan can help fund your next home improvement project.
Diversifying Your Investments
Many digital assets holders have a majority of their investment portfolio in cryptocurrencies. However, diversifying your investments is the best way to make sure your portfolio is safe from market fluctuations. A popular way to do this is by investing in real estate.
Some people will purchase a vacation home, purchase a second home to rent out as an additional income source, or even purchase a commercial property. For people who sit on a large amount of crypto, leveraging your Bitcoin or Ether can be a great way to simultaneously diversify your investments with real estate, while taking advantage of the crypto’s value without having to sell.
Crypto backed loans let you use your Bitcoin, Ether, Litecoin and other allowed coins to do things like buy a home, pay down debt, consolidate debt to a lower interest rate or even fund your business without having to sell your crypto.
This article contains investment advice or recommendations. Any investment involves risk, and readers should conduct their own research when making a decision to buy or sell an asset.
Frank Collins is a business development manager and an independent content contributor in the real estate and financing industries. As a solid supporter of technological advances in the real estate, he believes that the way society finances home is evolving. Using decentralization in lending can help the housing industry by leaps and bounds.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.