- A fintech company named Milo is introducing what's billed as the world's first crypto
mortgage . - It says its 30-year, low-interest rate US crypto mortgage allows qualified borrowers to hold their
bitcoin and buy real estate. - Loans have been granted in an early-access stage, with the product expected to be available to most applicants early this year.
A financial tech company is rolling out what it calls the world's first crypto mortgage through which borrowers obtain bitcoin-backed loans to buy real estate — combining the relatively new asset with one of the most established avenues of building wealth in America.
The company, Milo, said its 30-year, low-interest rate US crypto mortgage will allow potential borrowers to pledge their bitcoin to purchase property and qualify in financing 100% of the purchase with no dollar down payments required. Loans have been granted in an early-access stage, with the product slated to be available to most applicants in early 2022.
"I think this product really is a game-changer for many, many people. It accomplishes a lot of the aspects of what this consumer wants, which is to just continue to hold their bitcoin and be able to diversify and buy real estate – another fantastic wealth-creating asset," Milo CEO Josip Rupena told Insider in an interview.
The crypto loan industry is already taking shape, as the cryptocurrency market marked a notable year in 2021 when it briefly soared beyond a $3 trillion valuation for the first time. Crypto-backed loans are secured loans that use bitcoin and other digital assets as collateral.
Milo said its crypto mortgage already has a "large" waitlist, highlighting appetite among crypto investors to extend their wealth-building activities into housing as well as their reluctance to let go of their bitcoin to fund such purchases.
It can be "very difficult for [crypto holders] to qualify for a mortgage because the existing framework with banks and other lenders out there don't consider that crypto wealth. What that means is that they have to look for alternative ways of buying real estate," said Rupena. "Once they sell their bitcoin or crypto, that creates unintended consequences of having to realize gains and tax consequences," he said.
"And at the same time, the biggest concern for them is the opportunity cost over the existence of a bitcoin and digital assets. We've seen that over time it increases and appreciates, and has been appreciating," he said. "It's different for someone who has crypto than someone who lives in the conventional dollarized world. They really don't want to sell their crypto."
If the purchase price of a property is $500,000, a potential Milo borrower would need to pledge, through a third-party custodian, at least $500,000. Rupena said it will underwrite the borrower, look at various data points and run due diligence on the property, the title, and all other aspects of a pending transaction.
"That bitcoin will allow us to get comfortable with the consumer to be able to give them that loan. At the same time, they will continue to own the bitcoin through the course of the transaction," said Rupena. Milo is aiming to expand the product to allow borrowers to pledge other
Like other crypto loans, Milo's crypto mortgage has a margin-call component.
"If the crypto does go down by a certain amount … they could be subject to that. But they do have the opportunity to pledge more to mitigate against those factors," said Rupena. He said transactions are structured to minimize the impact of price volatility.
A licensed lender, Milo started in 2018 and is familiar with dealing with specialized customers as it has had a significant focus on clients living outside of the US. Rupena said the idea of a US crypto mortgage started because international customers who were holding digital assets were asking for such a product.
He said credit checks are part of the lending process for US domestic borrowers. "For international clients, [as] they don't have credit, we have found alternative ways of underwriting without credit … and then it's just one more data point for us."
Milo's other mortgage products for foreign nationals have originated millions of dollars in loans, with applicants from at least 63 countries, he added.
The crypto-mortgage market could be worth tens of billions of dollars, Rupena estimated.
"We know that there are billions of dollars outstanding of existing loans that are backed by crypto, by the number of buyers out there. So we believe at a minimum, it's a multi-billion dollar opportunity, if not larger, and it could be larger given the size of real estate as an asset class," he said.