Cryptocurrency and mortgages

Cryptocurrency and virtual currency mortgages explained If you’re hoping to get a mortgage by using your profits from a virtual currency like Bitcoin or Ripple as a deposit, this article is for you

We also explain how cryptocurrencies can be used to repay a home loan early and where you can turn when you need to find a mortgage lender that will approve you, given that so many can be apprehensive about this unregulated and innovative income.

What’s included in this cryptocurrency and mortgage guide?

What is cryptocurrency? 

How does mining work for Cryptocurrency?

 Can a cryptocurrency miner get a mortgage?

Can I use cryptocurrency for a mortgage deposit?

How to use cryptocurrency for a mortgage deposit

Can cryptocurrency be counted as income on a mortgage application?

Can I get a mortgage I can repay early with cryptocurrency?

How to pay off my mortgage with cryptocurrency

How can I get approved for a mortgage with a deposit or income from cryptocurrency?

What do mortgage lenders look at when assessing affordability for a mortgage with cryptocurrency?

How to improve your chances of getting a mortgage with income from cryptocurrency

Cryptocurrency mortgages: FAQs

What is a cryptocurrency?

Cryptocurrencies are a form of internet-based currency, that isn’t held or governed by a central system and therefore, this prevents one ruling party from abusing it.

Cryptocurrencies can be sent directly between two parties via the use of private and public keys. This process is referred to as peer-to-peer technology or p2p-technology

These transfers can be done with minimal processing fees, allowing users to avoid an expense typically charged by traditional financial institutions

The decentralized nature of the blockchain makes cryptocurrencies theoretically immune to government control and interference.

What makes cryptocurrencies so different from GBP or physical money is that ‘miners’ make the online payment network trustworthy and secure by verifying transaction information - not a central bank or authority

How does mining work for Cryptocurrency?

• Anybody can be a ‘miner’ - which is a person that earns cryptocurrency through confirming transactions.
• Miners use sophisticated computational technology to quickly look at transactions that occur through the relevant cryptocurrency they’re mining.They confirm that the transactions are legit.
• Transactions are clumped together in “blocks” and then added to a public record called the “blockchain.”;
• Nodes then maintain records of those blocks so that they can be verified and spread into the network
• This generates more coins to put into circulation, similar to how a gold mine works, as more gold is mined, it’s put into circulation to be traded.
• Miners are awarded with the relevant virtual currency whenever they add a new block of transactions to the blockchain.
• Miners need to have a wallet for their cryptocurrency so that any tokens or coins earned during mining will have a place to be stored.

Can a cryptocurrency miner get a mortgage?

The amount of mortgage lenders in the UK that are equipped to deal with Cryptocurrency in general, is slim.

This is frustrating but if you seek out a mortgage broker for their help with finding these niche lenders, you could save yourself some time and potentially some money too

While the choice for lenders may be few and far between, it’s not impossible for a cryptocurrency miner to get a mortgage in 2021/2022.

A good cryptocurrency mortgage broker will also compare the other aspects of mortgage agreements, rather than just fixate on finding one that accepts income from online currencies like Bitcoin, Ripple, or Litecoin.

Using their access to UK lenders they can scour the market and find the most competitive interest rates while also weighing up the pros and cons of the deposit requirements, term lengths, and early repayment fees

Can I use cryptocurrency income for a mortgage deposit?

Saving for a mortgage deposit can be tedious and with high-street banks offering low-interest rates on their savings accounts, the prospect of a high-return investment can be tempting.

The profits from virtual currencies including cryptocurrency, Bitcoin, and Ethereum can be used to save for a mortgage deposit but it’s important to be aware that the interest made or lost through virtual tender trading, is unregulated and therefore, the risk of loss for any investor is arguably high.

Always seek the advice of an independent financial advisor before investing money into any type of cryptocurrency.

Even experienced miners and traders are exposed to loss and if you’re banking on your deposit for a mortgage coming from Bitcoin or any other virtual tender, you should know that as more miners enter the market, competition increases, and therefore the difficulty of mining increases. If you already have enough cryptocurrency technologically tucked away, keep scrolling to find out how you can convert it into a physical deposit for a mortgage.

How to use cryptocurrency for a mortgage deposit

• You can’t use actual cryptocurrency or any other digital trading currency to pay for a mortgage deposit (it isn’t legal tender).
• However, you can convert your cryptocurrency into pounds sterling (GBP).
• You need a ‘trail’ to show how you acquired and sold the cryptocurrency.
• This helps to prove that the profits from cryptocurrency weren’t gained from money laundering.
• Lots of mortgage lenders don’t accept deposits from cryptocurrency, so ask a mortgage broker who can help you find the ones that do.
• Your chosen lender might refer you to their financial crime unit to check that your deposit hasn’t been illegally laundered but don’t panic, this is normal.

Can cryptocurrency be counted as income on a mortgage application?

When you apply for a mortgage, lenders look at proof of income, as well as other factors like the amount of debt and bad credit you have, to determine whether they can approve you or not.

The most important feature of a cryptocurrency is that it is not controlled by any central authority, unlike Great British Pounds, which are held by the Bank of England.

Cryptocurrencies like Bitcoin and XRP are unregulated and it’s very unlikely that mortgage lenders in the UK will accept income earned in this manner on a mortgage application.

Trading online with digital currencies is an unpredictable high-risk investment, so it’s impossible to foresee how much, or how little, you’ll earn in the future. Lenders can’t guarantee that you’ll keep up with your mortgage repayments and that puts them at risk for loss.

You may be able to prove that you’ve received a reliable income through cryptocurrencies but unlike income earned through employment, cryptocurrency income is likely to fluctuate

If your income were to drop one month, you could be unable to fulfill your financial obligations, including your mortgage, and ultimately, that could lead to your property being repossessed

What will mortgage lenders accept as income?

Acceptable incomes on a mortgage application include:

• Salary and wages
• Bonuses, commission
• Shares
• Allowances
• Dividends – as well as the
• Income from self-employment
• Benefits
• Pension
• Sustainable investments

Can I get a mortgage I can repay early with cryptocurrency?

The flexibility to repay a mortgage early, should an investment prove fruitful in the future, could be something you’re interested in, so having a professional carefully compare terms and conditions could alleviate unnecessary costs for you later down the line.

Many mortgage lenders charge early repayment fees (ERFs), also known as early repayment charges (ERCs). These can make relaying a loan early pretty expensive and in some instances, it could even cost you more money to repay early versus just repaying your standard monthly repayments.

If you repay a mortgage early, the lender stands to lose money because by reducing your debt, you pay less interest.

However, some mortgage products do allow their borrowers to repay early, without fees or with lower fees versus other lenders. Find mortgage lenders that allow early repayments with a mortgage broker who understands cryptocurrency and your need for this option.

How to pay off my mortgage with cryptocurrency

Any income earned through cryptocurrency must be declared through HMRC so it can be taxed, if necessary.

If you’re trading a cryptocurrency, you might have to pay income tax whereas if you’re selling it, you might have to pay capital gains tax.

If you have done this, it could be possible to repay a mortgage early using the profits which have been converted into GBP.

However, have your accounts checked by an accountant to prevent any errors that could slow your mortgage application down. Paying the wrong tax or no tax at all could result in your mortgage lender raising a Suspicious Activity Report with HMRC.

There are a number of building societies that may consider payments made in GBPs when the original source is cryptocurrency and each require evidence to satisfy anti-money laundering due diligence

How can I get approved for a mortgage with a deposit or income from cryptocurrency?

Lenders might not be prepared to accept income from cryptocurrency on a mortgage application but if you have income from other sources and you have a healthy deposit, you might be able to still meet the affordability requirements despite not being able to have that income included as part of maximum mortgage calculations.

Sources of deposits used for mortgages are assessed on a case-by-case basis and even if you find a lender that accepts deposits from online tender, you’ll still need to meet their other affordability requirements

That’s why getting approved for a mortgage with cryptocurrencies can be much easier when you have a broker on your side who will do the research and paperwork for you.

What do mortgage lenders look at when assessing affordability for a mortgage with cryptocurrency?

Your approval for a cryptocurrency mortgage will be based on your ability to evidence the source of your income as legitimate (i.e. it’s been declared through HMRC) and furthermore, your ability to repay your mortgage on time and in full. 

Mortgage lenders will look at several factors to determine whether you can afford the loan size you’re applying for including

• Your age (if you’re due to enter into retirement soon, this can cause some lenders to cap lending)
• Your annual gross income
• Your outgoings including household bills, food, childcare costs and debt
• Your level of debt against you income
• Your credit history and score
• The type of property you’re buying

• The size of your deposit

How to improve your chances of getting a mortgage with income from cryptocurrency

Mortgage criteria does differ between lenders so even if you’ve been rejected by a lender because your income or deposit comes from cryptocurrency, or because of bad credit or another other issue listed above, there could still be another lender elsewhere who will approve you under the same circumstances.

• Prepare the documents needed to apply for a mortgage. These include a driver’s licence or passport, bank statements for the past 3-6 months, evidence of your income which might be an SA302 if you’re self-employed
• Check your credit report to see what mortgage lenders can see when assessing you as a borrower. Don’t panic if there are ‘issues’ on your report because that might not result in an automatic rejection for a mortgage, it depends on your other circumstances and your chosen lender’s criteria.
• Save a larger deposit if you’re in a position to because this can lower your loan-to-value (LTV) so you borrow less and potentially pay less in interest.
• Get advice from a mortgage advisor because they’ll have access to a wide range of mortgages, some of which you may be eligible to apply for.

Cryptocurrency and mortgages:FAQs

What mortgage lenders approve mortgages for borrowers with deposits from cryptocurrency?

Some of the United Kingdom’s biggest mortgage lenders do not allow proceeds from crypto investments to be used for deposits whereas a select handful do.

Lending criteria changes all the time and to avoid misinformation and out of date advice, we recommend going directly to a mortgage broker who can use their online access to lenders to accurately get you the information you need

Should I repay my mortgage early with cryptocurrency profits?

Whether it’s financially worth it to you to repay a mortgage early, is a whole question on its own. You’d think repaying a mortgage balance early would be a good thing. After all, you’re reducing your debt and paying your lender their money back.

However, many agreements have ERPs, as mentioned previously, so always check before deciding to pay your balance early as in some instances it could even counteract any gains made through interest savings.

A mortgage broker can calculate this with a side-by-side comparison so you know exactly how much repaying a mortgage early with a digital currency could cost. 

Can you use cryptocurrency to buy a house?

Profits made from online currencies including Bitcoin, Steller, Litecoin, NEO and many others, can be converted into legal tender to buy a house. Whether you’re buying a house outright with cryptocurrency or using profits as a deposit to buy a home, you’ll still have to convert crypto assets into GBPs (if in the UK)