Bitcoin: Boom or Bust for Your Mortgage?
There is a lot that goes into getting a mortgage. Let’s set aside, for the sake of this blogpost and time, the emotions and the packing and the moving. Let’s just go with some of the nuts and bolts. It sounds simple, but it’s not all that simple.
Two of the biggest components in getting approved for a mortgage are income and assets. As a lender, I need to know that you have the ability to repay the loan (income) and that you have the funds to pay the down-payment, closing costs, pre-paid items, and reserves (assets…if you want to know more about that please check out this blog post . Bitcoin and other cryptocurrencies have the ability to impact both income and assets.
Bitcoins as Assets
Bitcoin has been around since approximately 2009 (proof of concept, but the idea of cryptocurrency was first published in 1998). And, I bet you’re thinking that it is an asset. Currency=money=asset. Yes, I agree. So from that standpoint, Bitcoin could be used in the mortgage transaction for anything any other form of money can be used. However, there are a few problems. What is a Bitcoin worth? Will anyone accept them?
Let’s start with what are they worth? In this case, we would treat it like any other foreign currency. It would need to be converted, at least in terms of value if not in terms of actual conversion, to US dollars. The good news is that there are exchanges for Bitcoins. According to coindesk.com, a Bitcoin was worth $436.04 at 20:00 UTC Feb 29, 2016.
In other good news, the IRS considers Bitcoins to be legal (the flip side of that is that they will tax you on the increase in value of your Bitcoins when you convert them to dollars to use in transactions). Think of it like the stock market. You buy Bitcoins at a certain value, they can increase or decrease in value. When you sell your Bitcoins you have a gain or loss on sale and that value is a taxable event. (Please, get with your CPA or another wise financial planner who is more knowledgeable than I am on tax matters to discuss this further if you have further questions)
The next pressing question is will anyone accept your Bitcoins? There are a lot of great ways to pay someone for good and services rendered. It does not mean that everyone takes every form of payment. As an example, I love paying for my groceries with ApplePay, but we don’t accept that as a way to pay for your mortgage fees (nor, by the way, do we accept cash….can you imagine someone coming to closing and counting out $1,000 in pennies….it is a good mental picture though). In late 2013, Bond New York made headlines, according to @HousingWire, when it became the first firm to accept Bitcoins for Real Estate Fees. According to their website, VistaAbstract says that they will accept Bitcoins for payment for Real Estate transactions.
If you own Bitcoins, know that they are new in the world of mortgage lending. Your lender may not know exactly what to do with them on your loan. I searched, and I could not find any guidelines that specifically addressed cryptocurrencies in either income or asset. They may need to do a bit of research and there is likely going to be a bit of extra documentation that you will need to provide. If you come in expecting a little extra time and a little extra documentation, you should be fine.
Bitcoins as Income
If Bitcoins are a currency, then there is a chance you could get paid with them as well. This could affect your income on a mortgage. While this is less likely than an asset scenario, it is interesting to explore. Colin Sydes @sydesjokes (or @ColinSydes) shares how bitcoin/blockchain could be a disruptive force https://twitter.com/SydesJokes/status/704650005789990912 and could change the way people in certain industries get paid. While I don’t think this is mainstream, yet…..there is always that possibility. Innovation is coming and coming faster than before.
Interesting Stuff
The first house I could find where a seller was accepting Bitcoins was listed in 2013 according to Newsday. It was a home in the Hamptons in Sag Harbor. It was listed for $799,000. Nothing else about the four-bedroom home was unusual, except that they were accepting Bitcoins as a form of payment. Presumably this house has already sold. But, I know of a house going on the market in the next few days where the seller is also willing to accept Bitcoins (since it is not yet listed I cannot share the details). Who knows if this will become a trend, but it is interesting.
Learn More
I am not an expert on Bitcoins or any other form of cryptocurrency; I just like to stay ahead of the curve for my referral partners and my clients. If you want to learn more about Bitcoins please check with an expert. Bitcoin, and other cryptocurrencies, are based on Block chain….learn more from the BBC via Michael Q Todd (find him on Twitter at @mqtodd ) http://vid.staged.com/yuBq . You can also check out this FAQ at https://bitcoin.org/en/faq#what-is-bitcoin . I have also included a few more links in the resources section of this blogpost for those with real curiosity.
Join us next time as we explore more in the world of mortgage lending. If you have a burning question or just want to chat — I love to be social……you can reach me on Twitter (@ChrisEllaLoans), Snapchat (ChrisElla2), CyberDust (ChrisElla), email ChristyS@StarkeyMtg.com, at the office at 912.721.9400, and my website at www.LoansWithChristy.com . Find out more about me and more ways we can network (Facebook, Instagram, Twitter) at www.about.me/chrisella
As always, if you liked this article please like, share, or comment…….or all of these things; they are greatly appreciated.
Christy Soukhamneut, Area Manager
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Resources:
https://bitcoin.org/en/faq#what-is-bitcoin
http://bankinnovation.net/2015/04/pay-your-mortgage-with-bitcoins/
http://www.huffingtonpost.com/jack-m-guttentag/will-mortgages-ever-be-tr_b_4781981.html
http://www.marketplace.org/2014/03/25/economy/irs-labels-bitcoin-asset
https://www.sindeo.com/blog/2015/07/08/what-owning-bitcoin-means-your-mortgage-2/
http://www.ourbroker.com/news/mortgages-real-estate-bitcoins-010614/
http://www.housingwire.com/articles/29208-bitcoin-for-mortgages?v=preview
https://bitcoin.org/en/faq#what-is-bitcoin
http://vistaabstract.com/buyrealestatewithbitcoin/
https://www.totalmortgage.com/blog/commentary/a-bit-of-history-is-made/23220
http://www.randyhilarski.com/bitcoin-emerging-economy/?utm_campaign=shareaholic&utm_medium=twitter&utm_source=socialnetwork
