Alright, well—it almost makes sense. Crypto mortgages are the new fad. You’ve got $300,000 in crypto. The mortgage company has $300,000 in cash. You leverage your crypto for the cash then you leverage that cash for a house and you’ve got it made. No taxes paid because you never cashed out the crypto.
But surely there’s a catch?
Why crypto mortgages do make sense
When you cash out your crypto you pay huge amounts of taxes, more if it was a short-term investment than a long-term investment. Crypto mortgages make it possible to secure a bank loan with your crypto equity, so you don’t actually have to cash out. The bank will hold your crypto as collateral but otherwise you’ve never cashed out. So, you can buy a house. And if you’re self-employed or a regular trader, you probably won’t qualify any other way.
If you’ve got millions of dollars in crypto, this type of mortgage makes absolute sense. Now, you’re still paying the mortgage, which also means that once you’ve paid off your house you’ll own it free and clear. But you get a great mortgage without having to go through a traditional qualification process.
Why crypto mortgages are insane
Okay, so the thing is, like everything in the crypto world, crypto mortgages are an amazing idea that can go south for you very quickly.
Let’s say that your $300,000 in crypto tanks and now it’s worth $100,000. Your bank will perform a mortgage call and you’ll either need to put up more equity, refinance your home, or otherwise come up and with the cash.
And let’s be honest, crypto is very volatile. So, the odds are that this could happen.
It’s a gamble. If everything works perfectly, you disrupt the mortgage industry and get an amazing house without paying taxes. If everything goes poorly, you’ll be back on your Robinhood app trading penny stocks in no time at all.
For the bank, they’re basically leveraging you. They’ve hedged their risks because either way, you’ll be left holding the bag. And they know you’re likely to pay considerable fees and high interest to avoid those hefty taxes.
What crypto mortgages mean for tech disrupters
Big picture time. Mortgage is a highly regulated and very controlled industry. Obviously, these aren’t going to be FNMA mortgages. But the very fact that you can even get a subprime mortgage with crypto means that crypto continues to bleed into conventional, mainstream spheres.
So, what industry will be next? Travel and hospitality? Restaurants? Manufacturing? As cryptocurrency continues to grow in adoption, it can also spread into other sectors. And just as Blockchain technology is changing everything from the Metaverse to legal contracts, crypto can be slotted into any type of equity or asset-based transaction.
Years ago, crypto fans on Reddit rejoiced when they could suddenly order a pizza through BTC. Being able to buy cars, houses, or even just groceries with crypto doesn’t just put crypto closer to adoption. It opens new opportunities. It’s not just about building some crypto mobile app anymore. Instead, it’s about what traditional industry you want to disrupt.