Why you shouldn't get your mortgage in bitcoin

Buyers looking for a home in the US can now apply for a mortgage using a new type of loan.

Milo has launched what it says is the world's firstcryptocurrencies mortgage. The Florida startup says it can now finance the purchase of a US home with the virtual currency.

Homebuyers don't have full control of their asset. If they want to sell their property, they will have to pay off their loan in full in US dollars before the company releases a lien. To qualify for the mortgage, a buyer must own a value of the digital currency equal to the total sale price of the home.

If their real-estate andcryptocurrencies appreciate, borrowers retain their bitcoin for the duration of the loan, allowing them to continue accruing value.

With mortgage rates at pre-pandemic highs, housing affordability tanking, and available housing getting snatched up with all-cash offers, acryptocurrencies mortgage might be a tempting opportunity to a certain set of prospective buyers. Over the past decade, the value of the digital currency has increased 9,000,000%. It is still a highly risky investment.

The lending model may not benefit the typical borrower according to the chief economist of Nest Seekers International.

Do I think it is a good idea for an average person to invest in cryptocurrencies?

How it works

Milo offers a 30-year fixed-rate US crypto mortgage that is equal to the sale price of the home. It is a loan that uses the digital currency as a security in the same way a home buyer would use a traditional mortgage.

Milo determines if a person is qualified using their wealth instead of their income on a tax return. At the time of purchase, borrowers don't need a cash down payment. Milo finances the entire purchase and stores it with a third party.

Milo acts like a traditional lender, earning money on interest and closing costs. Milo sells the property if a homeowner goes into foreclosure. If a homeowner wants to sell their real-estate asset, they have to pay Milo the full loan amount in US dollars.

That is where it gets difficult.

Why a crypto mortgage isn't for the typical borrower

Milo says that it is the first lender to use bitcoin as a mortgage security. Some of the lenders that allow borrowers to take loans or earn a return withcryptocurrencies are BlockFi, Avalanche, andNexo. Milo is one of the first companies to apply the model to mortgage lending.

Reupena said that people who borrow against theircryptocurrencies have to keep their loans current. He said that Milo's model eliminated the need for stability and gave borrowers more time to build wealth.

It is not for everyone. Someone who doesn't have a lot of ways to spend their newfound wealth is better suited for a mortgage on acryptocurrencies.

It would be for someone who has a high risk tolerance and believes in the further appreciation of the digital currency and doesn't want to sell yet.

It is a risky option for typical homebuyers to use cryptocurrencies.

The interest rate on the mortgage would go up if the value of bitcoin went down.

Reupena said that individuals that can access mortgages because they have the income to do so and fit the traditional criteria should definitely get a conventional mortgage.

Reupena told Insider that it had processed more than $400 million in loans and had a 7,000 person wait list.