Jan 17, · Investment in digital currencies has seen a rapid growth in the last year, but Bitcoin investors hoping to cash in and get on the property ladder could be facing problems as mortgage lenders refuse to accept deposits due to money laundering fears. Bitcoin is not an acceptable income. Westpac, one of Australia’s “big four” banks, said income from cryptocurrencies “is not currently considered an acceptable form of income for lending purposes”. It added: “Should a customer’s mortgage. Oct 19, · In its response to a leading mortgage broker, Fannie Mae indicated that Bitcoin could be used to secure a mortgage loan, but only if there was a full paper trail in place. If you plan to use your cryptocurrency holdings to secure a mortgage loan, you should first make sure you have all the paperwork to back up your claims and your investment.
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And while not all lenders recognize, or even understand, currency like Bitcoin, a growing number of mortgage companies are taking these alternative forms of payment very seriously. So should you buy your next home with cryptocurrency? Here are some things to consider. For starters, the volatility of the cryptocurrency market should give you pause, even if you currently have the funds to make the transaction happen through a platform like Flexipay.
How would you feel if the price of Bitcoin plunges a day before the closing, leaving you without the cash you need for the down payment? Conversely, how would you feel if you sold your Ethereum holdings to pay off your home, only to see the price of the popular cryptocurrency skyrocket? In the end, you could end up regretting the decision, much like the person who used their Bitcoin to buy a couple of pizzas when the coin was worth mere pennies.
Next, there are the tax implications of using cryptocurrency. The rules governing the use of cryptocurrencies like Bitcoin, Litecoin and Ethereum are still somewhat vague, and it is easy to make a mistake when reporting profits and losses. If you have been less than scrupulous at reporting your cryptocurrency transactions to the IRS, suddenly using those funds to buy a home or make a down payment could raise the ire of the tax agency, something you definitely do not need.
As you can see, using cryptocurrency to buy a home has some potential risks, but there are advantages as well. One of the biggest advantages is diversification — instead of holding the bulk of your assets in volatile cryptocurrencies, you get to branch out into the real estate market which is much more stable. If you were an early adopter in the Bitcoin, Litecoin or Ethereum revolution, you probably have accumulated a major return on investment.
Taking some of that money off the table is a great way to protect yourself and your finances while buying a home and giving yourself a reliable asset. The inherent volatility of the cryptocurrency market makes paying for the down payment in those funds impractical. You might feel great if the price of Bitcoin spikes in advance of the closing, but the opposite could happen just as easily. If you plan to convert your cryptocurrency holdings into real estate, you will first need to sell the Bitcoin, Ethereum, Litecoin or other digital assets.
If you fail to keep a valid paper trail, the bank or broker could refuse your mortgage application. You will also need to make sure your transaction is conducted in U. The taxing of cryptocurrencies like Bitcoin and Ethereum is complicated and there is still some vagueness to the rules and regulations. Banks are extremely risk-averse and are only willing to lend money against currencies that are regulated in their own country.
It would effectively be like owning a portfolio of shares. Barclays, the UK bank, said it will only lend against income that is in British Sterling, although it might expand this to other currencies in the future.
Either way, the loan would always be in Sterling. It might be possible to use your crypto income to pay for a house deposit, although it depends which bank you use. HSBC does not process virtual currency payments and we do not bank virtual currency exchanges. It is already extremely difficult to satisfy banks that deposit funds have been built up in a legitimate way. It would probably be nigh on impossible to do the same with cryptocurrency, particularly given widespread concerns around money laundering.
Even getting a small loan to buy a car could prove to be a challenge. There will need to be a huge sea-change for banks to be willing to provide mortgages and loans based on a bitcoin salary.