In a Linkedin post, Mike Cagney co-founder and CEO of blockchain startup Figure Technologies announced plans for a cryptocurrency-backed mortgage to launch in April. No cash down payment is required, but the real estate mortgage is secured by both the property as well as 100% of the loan value in cryptocurrency – Bitcoin or ETH. Plus the rate could be as much as 5.99%. So if someone wants to buy a $20 million home, they deposit $20 million in collateral.
We can totally see how this double security works for the lender. But in terms of borrowers, it might only appeal to those who – for some reason – can’t get a mortgage any other way. We’ll show below why this is an expensive route even if someone wants to keep HODL onto their cryptocurrency.
According to Cagney, “The only underwriting is to make sure you don’t have so much debt that the crypto can’t suffice for ability to pay.” If the crypto prices collapse, there is a potential margin call, but there is a generous cushion, as Cagney pointed out.
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