Bitcoin Mortgage Payments Coming Soon

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The country’s second-largest mortgage lender aims to give borrowers the option to pay off their mortgages in Bitcoin by the end of the year. United Wholesale Mortgage claims it will be the first mortgage company in the United States to accept cryptocurrency in exchange for monthly payments.

“UWM plans to accept Bitcoin because we have almost a million consumers paying us a monthly mortgage payment, and we’re still trying to find a way to make things easier for our customers,” said Mat Ishbia, Chairman and CEO of the company. .

The move raises familiar questions about cryptocurrency and the ability of this virtual currency to serve as a medium of exchange, in addition to its well-known role as a vehicle for speculation. Financial experts don’t expect a rush of people paying their mortgages this way.

“It’s good to know that individuals can pay off their mortgage with cryptocurrency, but due to operational issues for the individual investor, I think very few will,” says Clark Kendall, a financial advisor who runs Kendall. Capital Management in Rockville, Maryland.

How will Bitcoin mortgage payments work?

United Wholesale Mortgage is the country’s second largest mortgage lender. It issued more than 560,000 loans in 2020, a tally that only tracked Rocket Mortgage, according to a Bankrate analysis of federal data from the Home Mortgage Disclosure Act.

Ishbia says United Wholesale Mortgage will open its doors by accepting Bitcoin, the most important cryptocurrency. Its total market value is approaching a trillion dollars.

Ishbia said his company is considering accepting other virtual coins as well. He didn’t name any names, but Ethereum, Cardano, XRP, and Litecoin are some of the most popular cryptocurrencies.

United Wholesale Mortgage has not released any details on how the payments might work. Will consumers pay from accounts with Coinbase or other cryptocurrency brokers? It’s unclear.

The company is still working on these issues with federal authorities. “The great part of working in such a carefully regulated industry is that we are able to work directly with regulators to make sure we’re doing right for everyone before a change like acceptance of cryptocurrency rolls around. to happen, ”Ishbia said.

Bitcoin’s volatility complicates matters

Bitcoin has received a lot of interest over the past year and its price has moved accordingly. As of September 2020, a single bitcoin was trading for just over $ 10,000. In April 2021, the price was flirting with $ 65,000.

A few months after hitting that high point, Bitcoin plunged below $ 30,000. It is up again, hovering around $ 50,000. This roller coaster ride is the opposite of the stability that characterizes currencies as important as the dollar and the euro.

Bitcoin’s volatility raises a number of challenges. On the one hand, there is a lag between a debt payment denominated in a stable currency and a medium of exchange whose price fluctuates enormously.

“If your monthly mortgage payment is $ 1,000, are you sending $ 800 or $ 1,200 of Bitcoin for this month’s payment?” Kendall asks.

Greg McBride, chief financial analyst at Bankrate, is also suspicious. “I wouldn’t recommend basing the certainty of next month’s mortgage payment on the price of a stock you currently own, and I certainly wouldn’t recommend doing it on a speculative asset basis,” he says.

The value of Bitcoin can move so strongly that borrowers might even worry about an increase in value between the time the payment is made and the account credited.

For true believers in Bitcoin, the concept of using cryptocurrency to pay bills is counterintuitive. If you think Bitcoin will be worth more than $ 100,000, why would you use it to pay off the mortgage when boring old dollars will do the same job?

Tax problems could be thorny

Taxes are another stumbling block. While tax policies regarding cryptocurrency are underway, the IRS is considering using cryptocurrency to purchase something or to pay for an expense for a potentially taxable event. So the seemingly simple act of trading bitcoin for a mortgage payment could trigger the capital gains tax, according to the American Institute of Certified Public Accountants.

“I only saw recommending the use of cryptocurrencies to pay off debt if the investor was looking to unload their cryptocurrency and pay off their mortgage in full,” Kendall said. “Using cryptocurrencies to make monthly mortgage payments doesn’t make operational sense in my book. “

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