Financing a house with crypto

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Direct cryptocurrency transfers can happen much faster than traditional home sales. Just like with a cash sale, a direct cryptocurrency sale from one party to another cuts out the hassle and paperwork associated with a traditional mortgage-funded home sale. You may get a better deal. You may pay less than you would with a cash offer or mortgage-funded offer. What are the cons to buying a home with cryptocurrency? When considering buying a home with cryptocurrency, watch out for these drawbacks: Not all sellers accept cryptocurrency.

While trust is growing in Bitcoin, Ethereum and their competitors, few sellers are ready to go all-in and accept cryptocurrency as payment for a real estate transaction, so it may limit your home-buying options. Cryptocurrency exchanges may be subject to capital gains taxes. The IRS considers cryptocurrency a type of property, property that must be sold in order for you to realize its value in dollars.

Be sure to consult a tax professional to find out how using cryptocurrency to buy a home may affect your tax liability. You may have fewer legal protections in a cryptocurrency transaction. For users of cryptocurrency, two of its main selling points are security and anonymity. But that means transactions are difficult to trace, so if anything goes wrong, you could face a sticky legal situation.

Be sure to consult a legal professional to learn how to protect yourself. Mortgage lenders may not accept cryptocurrency-derived dollars for a down payment. The value of cryptocurrency is constantly changing.

Imagine offering four Bitcoin for a home, having the offer accepted, and then watching the value of Bitcoin double right before the contract is signed. A number of new fintech platforms are rolling out products for this very purpose. The loans can be used for major purchases of things like autos and real estate. These companies claim to help everyone from the unbanked to high-net-worth individuals expand their lending options by leveraging crypto assets.

This prevents the need to cash out your crypto and avoids creating a taxable event in order to buy a house. Each lender will have a different LTV equation. A drop in prices could alter the LTV negatively, which could trigger something called a margin call. If a margin call was triggered, the lender would require you to deposit more crypto to bring the LTV back to the original level. The value of real estate, however, rises at a much slower pace than a mooning crypto, and so you could also stand to lose money in the short term.