According to This is Money, more than 2 million Brits now hold bitcoin.
As countries and corporations begin to accept cryptocurrency as legal tender, and as the demand for non-fungible tokens (or NFTs) grows, it seems inevitable that crypto will move further towards the mainstream.
Indeed, the Guardian reports that the Treasury has even asked the Royal Mint to create an NFT to show Britain is at the cutting edge for new cryptoasset technology.
As crypto becomes more popular, increasing numbers of clients are asking us questions about crypto and mortgages. These include:
- Can I take out a crypto mortgage?
- Can I use crypto as a deposit?
- Can I borrow against crypto assets?
Read on to find out answers to these questions and more.
Bitcoin and other cryptocurrencies becoming more popular with investors
In recent years, interest in cryptocurrencies such as bitcoin, ethereum, and tether has surged. Indeed, the Independent report that their total value has reached nearly $2.5 trillion, rivalling the size of G7 economies such as Canada and Italy.
PayPal now lets users buy crypto on its app, while Twitter helps people show appreciation for tweets by tipping their creators with bitcoin.
Supporters of cryptocurrencies say they offer many benefits for investors, most notably as an asset whose price moves independently of the economy, rather than tracking it like so many other investments do.
Others see crypto as the future of finance, allowing transactions to sidestep middlemen and fees with a currency that’s not beholden to any government.
However, critics point to the many drawbacks. The value of cryptocurrencies is notoriously volatile, they have no intrinsic value, and they are not backed by physical assets. They are also damaging to the environment, due to the electricity consumed in mining them.
Despite these negative factors, it seems inevitable that interest in crypto will continue to grow – so here’s everything you need to know about crypto and mortgages.
Can I have a mortgage in crypto?
At present, it’s not possible to take out a mortgage in crypto.
If a defining characteristic of a mortgage is that it’s a long-term debt, a bitcoin mortgage is literally impossible.
Let’s pretend that you could take out a bitcoin mortgage and you did so three years ago, in March 2019.
At that time, one bitcoin was worth around £3,000. So, your mortgage of £500,000 would have converted to around 167 bitcoins.
At the April 2022 bitcoin price of £35,032, your mortgage would now be worth around £5,850,350. It would’ve peaked at more than £8 million in November 2021.
Due to the highly volatile nature of cryptocurrencies, it would be virtually impossible for a crypto mortgage to run for more than a few weeks before the lender switched it back into pounds.
Can I use cryptocurrency as my deposit?
While you can’t directly use bitcoin or other crypto as your deposit, there is an increasing number of lenders in the UK who will let you use the profits from the sale of cryptocurrencies as a deposit.
You are likely to need to provide a clear paper trail showing the source of these funds so the lender can comply with anti-money laundering regulations.
You may have to provide:
- Details/proof of the original purchase of the cryptocurrency
- The source of these funds
- Where you have traded the cryptocurrency (exchange, platform and so on)
- Where and when the assets were sold.
If you’re unable to provide a fully audited trail for your crypto, you may find that your mortgage lender will reject your application.
Can crypto profits form part of my income when I come to take out a mortgage?
If you are in the position that you have made money from investing in crypto then you might want to use this as part of your declared income when you come to make a mortgage application.
However, lenders won’t accept profits from crypto trading as part of your income. This is because the volatile nature of the asset means earnings will be unpredictable, and so lenders can’t satisfy themselves that this income will be regular when it comes to assessing affordability.
Can I pay my mortgage with crypto?
While you can’t directly pay your mortgage with cryptocurrency, you can potentially use the profits you make from bitcoin or other crypto to meet your monthly repayments.
For example, if you cashed in some of your crypto profits and changed this into fiat currency (such as pounds) you can use this to make your mortgage payments.
Can I borrow against my crypto assets?
Just like a property or investment portfolio, your cryptocurrency can serve as collateral for a loan.
A crypto loan is a type of secured loan, similar to a mortgage, in which you pledge an asset to secure finance. In this case, cryptocurrency is the asset offered to a lender in exchange for cash that you’ll pay back as a loan. If you fail to repay the loan, the lender will liquidate or cash out the crypto.
This approach may work if you hold a significant amount of crypto and you want to obtain liquidity without having to sell.
Get in touch
If you’d like more information about crypto and mortgages, please get in touch. Email [email protected] or call us on +44 (0) 20 3411 0079.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws.
