It’s fascinating to see how cryptocurrency products are evolving. They’re moving beyond just being a currency or a store of value.

In this piece, Meredith Yarbrough, managing partner and co-founder of La Hoja Capital Partners, explores how bitcoin could be used as collateral for mortgages.

How Can Bitcoin Help Achieve the American Dream?

Homeownership has always been a big part of the American dream. But there are risks that both borrowers and lenders face, no matter what the market looks like. Borrowers deal with property value swings, negative equity, and ongoing costs like taxes and maintenance. Lenders, on the other hand, worry about defaults and economic downturns.

Some innovative credit managers are starting to use bitcoin in commercial loans. This raises an important question: Can we adapt this idea for mortgages? The goal would be to lower risks for both sides while tapping into bitcoin’s growth potential.

Your Home: A Concentrated Financial Risk

For many Americans, owning a home means tying up a lot of wealth in one place. Property values can change based on market conditions and local factors. Plus, homeowners face ongoing costs that can make it hard to access cash in emergencies.

Bitcoin: A Liquid, Appreciating Asset

Bitcoin has a fixed supply and is gaining acceptance, making it a strong candidate for mortgage collateral. Unlike real estate, bitcoin is highly liquid. You can convert it to cash quickly, giving homeowners faster access to funds when they need them. Its value is driven by scarcity and a history of long-term growth, which can benefit both borrowers and lenders.

Using Bitcoin in Mortgages

To make this work, both borrowers and lenders need to share a long-term vision. Bitcoin’s volatility is well-known, but its potential for long-term appreciation is significant. Both parties can benefit from this growth while sharing the associated risks.

In this model, the mortgage covers the home’s cost and includes a portion for buying bitcoin. The lender manages the bitcoin part, and as its value rises, profits are shared. This arrangement encourages long-term homeownership and reduces the chance of early repayment.

Benefits for Lenders and Borrowers

This hybrid approach offers several advantages:

  • Reduced risk for lenders: Including bitcoin diversifies the collateral, protecting lenders from real estate market downturns.
  • Better loan terms: The growth potential of bitcoin can lead to lower interest rates and more favorable loan conditions.
  • Shared growth: Both parties can benefit from bitcoin’s appreciation. Lenders enhance their portfolios, while borrowers gain equity that can help with liquidity or home improvements.
  • Sustainable homeownership: By leveraging bitcoin’s growth, homeowners can offset ongoing costs, making ownership more manageable.

A New Approach to Homeownership

Using bitcoin as collateral gives homeowners access to an appreciating asset. This can help cover ongoing expenses like repairs without dipping into savings or taking on more debt. It adds flexibility and makes homeownership more sustainable.

On a community level, the impact could be significant. Homeowners benefiting from bitcoin’s growth would likely invest more in their properties, improving neighborhoods overall. This could lead to healthier, more vibrant communities and new opportunities for sustainable homeownership.

Integrating bitcoin into mortgage structures creates a more dynamic relationship for both lenders and borrowers. As bitcoin continues to gain traction, it could reshape traditional mortgages and enhance the American dream.

- Meredith Yarbrough, managing partner and co-founder, La Hoja Capital Partners

Expert Insights

Q. What similarities exist between Bitcoin and the American Dream?

At its core, the American dream is about believing that success is possible through hard work. Bitcoin represents the ability for individuals to take control of their financial futures without relying on centralized institutions. It’s all about promoting freedom and self-sovereignty.

Everyone should have an equal opportunity to succeed. With bitcoin, anyone with internet access can participate and gain access to financial resources.

America has always thrived on entrepreneurial spirit. Bitcoin is a technology that pushes us toward the next stage of human progress.

Q. How can I use BTC to get a mortgage in the US?

Start by assessing your goals and priorities. Build a thoughtful plan that doesn’t concentrate too much on any specific investment. Too much focus on one asset can be risky. Balancing digital and traditional assets can be a smart strategy if done right.

If someone is heavily invested in BTC, it might be time to discuss ways to reduce risks or set realistic expectations for buying a home. Mindful planning is key to using assets effectively. Also, remember that in many cases, renting might actually be a better financial choice for your needs and overall strategy.

- Eric Tomaszewski, financial advisor, Verde Capital Management

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