Not too long ago, the mere thought of using cryptocurrency to buy a home was ridiculous.
But today, it’s far from a wild thought; for many buyers, it’s a reality. A growing number of home sellers, buyers, agencies, investors, and real estate professionals are willing to work with cryptocurrency. Right or wrong, wise or foolish, cryptocurrency has become an accepted method of payment. Sellers take it as payment for a home, and even some lending offices are willing to accept cryptocurrency as downpayments and assets holdings.
If you own a significant amount of cryptocurrency, you can use this asset towards your purchase, either to make the entire purchase or as a downpayment on a loan.
You’ll need to find the right organization, and the process will be a little different, but it is possible.
How to Use Cryptocurrency to Buy a Home
While the details and specific process can vary wildly, overall there are essentially three ways that cryptocurrency can be used to purchase a home.
Convert the Crypto it to Cash
The first method is to take your cryptocurrency, sell it (convert it to U.S. dollars), then use this cash to purchase a home, either as the full payment or a downpayment. In all reality, this is not really using cryptocurrency to purchase a home, as you are converting it to another currency (in this case, U.S. dollars) then using that currency to make the purchase. Essentially, it’s the same as selling any property of value and using the proceeds on your purchase.
This method is probably the most simple, and it’s a good technique when you can’t find a seller or lending office that is willing to work with crypto.
Before selling the cryptocurrency, it’s important to document every part of the process, from the original purchase of the currency to the final sale. If you fail to keep a strong paper trail the bank could reject a mortgage that uses the funds.
Transfer it Directly to the Seller
As cryptocurrencies like Bitcoin become more popular and better understood by the general public, there are more sellers on the market willing to accept this form of payment. If you want to buy a home with your cryptocurrency, you need to first find a seller who is willing to accept cryptocurrency as payment for the home, assuming you have enough to make the purchase.
Some sellers, it should be mentioned, may only be comfortable taking one type of currency. For example, your seller may only want Bitcoin and won’t accept Ethereum.
If you are purchasing a home using cryptocurrency, make sure you contact a legal professional who can ensure the purchase is done right. They will make sure the proper paperwork is completed so your purchase is legitimate.
Borrow Against the Cryptocurrency
The other option to use cryptocurrency to buy a home is to borrow against the currency. In this strategy, you’re not selling or moving the cryptocurrency, but merely using it as collateral on the loan. This means, essentially, that if anything happens where you become unable to repay the loan, the lending institution has a legal right to seize your cryptocurrency.
Many organizations in the mortgage industry have indicated that they will accept Bitcoin to secure a mortgage, but it needs to be under specific circumstances. Even today, using cryptocurrency is relatively new, and agencies or companies are constantly changing and redefining their positions.
Benefits of Using Cryptocurrency to Buy a Home
Why use this asset at all? If you own cryptocurrency, wouldn’t it be best to hold it and let it (hopefully) gain in value? While this is certainly a fair argument, there are some clear benefits to using cryptocurrency to buy a home.
Trading for a More Secure Asset
The first benefit, and possibly the most popular, for using cryptocurrency to buy a home, is that you are trading an unstable, uncertain asset (cryptocurrency) for one that has a long-established record of stable upward growth.
Cryptocurrency, of course, can skyrocket in value, but it can also plummet quickly. Real estate, in general, has been growing in value for centuries; it’s unlikely to fall in value. Adding a safe, secure asset in place of an unstable (yet potentially hot) asset is a good choice for many buyers.
Potential Discounts
Some sellers are willing to give major discounts to buyers who purchase with cryptocurrency. A seller could, potentially, see more value in crypto than cash, and they many be willing to give you a deal. Using crypto also makes your offer stand out, and it could help catch the attention of a willing seller.
Speed of Purchase
In a similar manner to buying a house with cash, if you can purchase a home with cryptocurrency, you may be able to accelerate the process. This is because you can find a buyer, make the purchase, and avoid the mortgage process, which, while often faster than expected, does take time. Using Bitcoin, you could, potentially, purchase a home in a matter of minutes.
Things to Keep in Mind When Buying a Home with Cryptocurrency
Keep a Paper Trail
Reliable documentation is critical when using cryptocurrency to purchase a home. Make sure you have documentation in place throughout the entire process and have every step of the transaction recorded, in duplicate if needed. This is also where working with a professional will be extremely useful.
Don’t Forget the Taxes
When buying a house with cryptocurrency, as with any other form of purchase, there are taxes and fees you’ll have to pay. Be sure to account for these expenses, including real estate agent fees, origination fees, recording fees, property taxes, and more.
You May Need to Use a Digital Wallet
Some banks and credit cards have banned the use of transactions that use cryptocurrency in any way. This could mean that you have to initiate the transaction using a digital wallet. Consult your financial institution or advisor for advice on this issue.
Get the Support You Deserve for Your Purchase
If you need help purchasing a property, contact our staff today. We’ll help you understand all the issues involved in your purchase, and make sure you find the right mortgage for your budget and needs.
