It took Vincent Burniske months to get a seven-figure loan to buy two small apartment buildings in a coveted Miami neighborhood. The sports-media consultant had money — but much of it was tied up in crypto.
Digital wealth meant little to banks when it came to a mortgage. And Burniske, 63, wanted to keep his coins rather than trade them for dollars.
“If you cash out, you have to pay sizable tax and you’re leaving a lot of upside on the table because you’re getting 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 part of his Bitcoin and Ethereum holdings. He nailed down the loan from Milo Credit, a Miami-based startup that’s seeking to tap into the burgeoning pool of crypto loyalists who want to diversify their wealth while hanging on to their tokens.
Crypto mortgages are the latest example of the deepening role of digital coins in the U.S. real estate market, with property buyers and lenders alike embracing the volatile currencies to underpin deals for hard assets. Last year, Fannie Mae started allowing borrowers to use crypto for their down payments. New buildings going up in tech hot spots like Miami are accepting digital tokens for deposits on condos. A house in Tampa, Florida, even sold as an NFT earlier this year.
The home loans offered by Milo represent a new twist. Instead of simply paying for property with tokens, borrowers pledge their digital holdings as collateral, with no down payments necessary. That enables the holders to keep their coins, avoiding taxes on capital gains and theoretically benefiting from rising values for both the tokens and the real estate. It also heightens risk by using a volatile asset to finance purchases at a time the heated U.S. property market faces a slowdown from the fastest jump in borrowing costs in decades.
Milo wants to make such loans a big business by pooling them and selling them to banks, asset managers and insurance companies, maybe even offering them as bonds in a securitization, according to founder Josip Rupena.
Wall Street’s financial engine is already looking at the novel mortgages.
“We’ve advised on several matters involving the origination of loans backed by crypto and NFTs for eventual securitization and similar concepts, said Steve Blevit, a partner at law firm Sidley Austin, who specializes in financing esoteric assets. “We see a lot of interest in this area and expect it will develop into a new asset class.”
Until now, those with large crypto holdings who didn’t want to sell were turning to companies like BlockFi, which offers collateralized loans that can be used to buy property. There’s also Austin, Texas-based Unchained Capital, which offers three-year loans with up to 14% interest rates.
Milo, which started originating home loans in 2019 for non-U.S. citizens, is offering a product that looks more like a traditional mortgage. If its wait list of more than 8,000 people ready to buy property in states such as Texas, California and New York is any indication, the company’s crypto offering may dwarf its $100 million of foreign national loans.
The company has issued pre-approval letters on $340 million of mortgages in the last 30 days. Milo recently received $17 million in Series A funding led by venture-capital firm M13 to help fuel growth.