Most mortgages are based on fiat currencies. More are becoming available through the use of Bitcoin payments. We discuss this in the article below.
Fans of cryptocurrency will espouse its merits all day long. Yet the truth is that very few standard goods and services can be bought using cryptocurrency. The real estate sector is one place where this is gradually changing, with the introduction of Bitcoin mortgages. Offering several advantages, they could be the next way to buy a property. But how safe are they?
If the Bitcoin market is to increase in value over the long term, then further institutional adoption is needed. Nowhere is that personified more than in the world of real estate and Bitcoin mortgages. While this is still a niche sector, as are loans in Bitcoin, they are gaining popularity. The market is currently worth around $8.58 billion but is predicted to increase to $45.27 billion by 2030.
This year, Bitcoin has had giddy heights and stagnant lows. It reached an all-time high of $109,114 on Inauguration Day as a new crypto-friendly regime came to the United States. However, it then dropped and stagnated. The last few weeks have seen a resurgence fuelled by several factors, including increased institutional adoption such as this. It has threatened to breach this January high, but has since dropped back to stabilise at $105,151. The Bitcoin price outlook does look positive, with major financial institutions like Morgan Stanley predicting that it will flip gold by the end of the year.
There are even companies that deal specifically in crypto-backed mortgages. This is done by using Bitcoin as collateral, instead of selling it for fiat currency. They can provide 100% financing on a property with no down payment. All the buyer needs is collateral in the form of Bitcoin that equals the property's price.
Using smart contracts also means the process comes with several advantages. This includes a fast application process that does not require any credit check.
Florida has become a hub for Bitcoin mortgages in the US, as more real estate agents turn to it as a way to attract more customers. With this, people can pay in Bitcoin. It is then transferred to fiat currency and given to the seller. This means it is not a direct exchange based on crypto, but it is more of a payment method. Reports have been that the uptake has been slow with it being a new sales method. However, it is not unused, with properties already going through sales processes in cryptocurrency.
Many buyers are attracted by the speed with which these sales can be put through. As a peer-to-peer service, it is an instant transaction. With the use of smart contracts, it cuts out a lot of paperwork and the middlemen. Not only does this increase speed, but it also cuts down on costs.
Detractors are abound, who believe this is reckless, and they may be right. This is down to two reasons. The first is that despite further adoption, there is still very little in the way of regulation. This applies to cryptocurrency generally in the world of finance. When it comes to mortgages in Florida, it is nonexistent.
Secondly, Bitcoin is extremely volatile. Despite a gradual increase in price, it is still prone to drops and dips. This could have a serious impact on Florida's housing market, which is already in trouble. Its average house price is $389400, down 3.2% over the past year. This saw a median drop of 1.7% in March alone.
In the United Kingdom, Bitcoin mortgages are nonexistent. However, prices for property in Bitcoin have now been listed on the website Moveli. This is a self-employed estate agency based in the United Kingdom. The website claims to be the first to allow buyers to view prices in cryptocurrency.
While the property value is listed in Bitcoin, it must still be paid for in fiat GBP. Exchange rates on the website will reflect the current prices, which have changed radically over the last few months. Ben Littlewood, the Co-CEO at Moveli, exclaimed that “Whether you’re a BTC advocate or just curious, it’s exciting to see property listed in BTC. In an increasingly global world, where property is a core asset class and Bitcoin is gaining traction as another, this felt like a natural and forward-thinking step for us.”
For those with a healthy store of cryptocurrency, Bitcoin mortgages could be an option when buying their perfect home. Any transaction must be legally sound, and this may involve paying more fees than would be available in a standard mortgage. There are advantages to it, such as speed and efficiency. It may be some time before it is more widely accepted, but it could be here sooner than you think.
