It took Vincent Burniske months to secure a seven-figure loan to buy two small buildings in a coveted Miami neighborhood. The sports media consultant had money – but much of it was crypto-related.
Digital wealth meant little to banks when it came to a mortgage. And Burniske, 63, wanted to keep his coins rather than exchange them for dollars.
“If you cash in, you have to pay big taxes and you leave a lot of benefits on the table because you get out early,” he said.
Then came an option that wasn’t available when Burniske found the properties late last year: a 30-year fixed-rate mortgage secured by a portion of his Bitcoin and Ethereum holdings. He secured the loan from Milo Credit, a Miami-based startup looking to tap into the burgeoning pool of crypto-loyals who want to diversify their wealth while retaining their tokens.
Crypto mortgages are the latest example of the growing role of digital coins in the U.S. real estate market as home buyers and lenders embrace volatile currencies to underpin trades in hard assets. Last year, Fannie Mae began allowing borrowers to use crypto for their down payments. New buildings being built in tech hotspots like Miami are accepting digital tokens for deposits on condos. A house in Tampa, Florida was even sold as an NFT earlier this year.
The home loans offered by Milo represent a new twist. Instead of simply paying for the property with tokens, borrowers pledge their digital assets as collateral, with no down payment required. This allows holders to keep their coins, avoid capital gains taxes, and theoretically benefit from rising token and real estate values. It also increases risk by using a volatile asset to fund purchases at a time when the booming U.S. housing market faces a downturn following the fastest rise in borrowing costs in decades.
Milo wants to make these loans big business by bundling them up and selling them to banks, asset managers and insurance companies, perhaps even offering them as bonds in a securitization, according to the founder Josip Rupena.
Wall Street’s financial engine is already looking at new mortgages.
“We have advised on several matters involving the origination of crypto and NFT-backed loans for potential securitization and similar concepts, said Steve Blevit, partner at asset finance law firm Sidley Austin. “We see a lot of interest in this area and expect it to develop into a new asset class.”
Until now, those with large crypto holdings who didn’t want to sell turned to companies like BlockFi, which offers secured loans that can be used to purchase property. There’s also Unchained Capital, based in Austin, Texas, which offers three-year loans with interest rates of up to 14%.