Cryptocurrency and Mortgages
If you want to buy a house with cryptocurrency profits, read on to find out which lenders will consider your application, how to use cryptocurrency for a deposit and how a broker can help.
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With cryptocurrencies starting to gain more traction, the big question for prospective homebuyers is can they use Bitcoin, Ethereum and other cryptos as a deposit for a mortgage?
In this comprehensive guide, we explain everything you need to know about using cryptocurrency as a source of deposit for a mortgage, including which lenders will consider your application and how a broker can help.
Read on for more information or jump to the section that’s relevant to you via the links below…
Can you use cryptocurrency to pay for a mortgage deposit?
Yes, certain lenders will allow you to use cryptocurrency as a deposit for a mortgage. You can’t use the cryptocurrency itself but you can use cryptocurrency profits once they’ve been converted into sterling, or ‘fiat’ currency as it’s known in the cryptocurrency world.
Finding a lender who’ll happily accept your crypto profits, however, won’t be straightforward.
Given the anonymous nature of cryptocurrencies, many lenders haven’t decided where they stand on accepting them. As a result, many will turn your application down immediately. The rules on this are the same across the U.K, including Scotland.
There are, however, a handful of lenders in the UK who will consider lending to you.
Why are some lenders wary of this?
Under anti-money laundering regulations, mortgage lenders need to be able to verify where your deposit funds have come from to make sure you have accessed them legally. This isn’t always easy to do with cryptocurrencies. The market is unregulated so crypto has become a popular route for money launderers.
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Which lenders are crypto-friendly?
A small number of lenders in the UK will consider your application if you’re using cryptocurrency as a source of income for your deposit.
These are known to include: Pepper Money, Loughborough Building Society, Generation Home, Norton Home Loans, Bluestone Mortgages as well as Barclays, Nationwide and NatWest.
As the cryptocurrency market matures, however, this list will quite possibly grow.
How to get a mortgage using cryptocurrency as a deposit
If you want to apply for a mortgage using crypto profits as a deposit, here are a few essential steps you should take…
Speak to a mortgage broker experienced in cryptocurrency.
Seeking advice from a whole-of-market broker is highly recommended. These types of applications can be complicated so you’ll want someone who knows what they’re talking about on your side.
A broker who specialises in mortgages with cryptocurrency deposits will have long standing relationships with lenders who accept Bitcoin, Ethereum and other cryptos, and will be able to find you the most favourable deal. They’ll also be able to help you gather the appropriate paperwork (more on that below).
It’s worth noting that the majority of crypto friendly mortgage lenders are specialist lenders, who typically won’t accept applications from the general public and instead will require an introduction from a reputable broker.
We have brokers in our network who specialise in helping applicants using cryptocurrencies get a mortgage. Get in touch and we’ll match you with an expert today.
Gather your evidence about your crypto holdings.
As mentioned above, lenders will want to know about the origins of your cryptocurrency investments. That means you may need to provide a papertrail showing how you acquired and sold your holdings. You may need paperwork, bank statements and documents to show:
- Where the money you used to buy the crypto came from
- How much you held and for how long
- Where you held the crypto (on an exchange? In an offline wallet?)
- When you sold it
- When you bought it
Make sure you have declared your profits to HMRC.
You can only legally put cryptocurrency profits towards your deposit if you’ve declared your income to HMRC and paid tax on the gains. Anything over your Capital Gains tax-free allowance, which at the time of writing (October 2022) is £12,300, must be taxed appropriately.
If your lender suspects you haven’t paid the right amount of tax, not only will they refuse your application, they may also file a Suspicious Activity Report with HMRC, which could get you in serious trouble.
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Can you use cryptocurrency to pay for your mortgage?
You can’t use actual Bitcoin or Ethereum (or any other type of cryptocurrency) at present as no lenders will currently accept this. But in the future it may be possible for you to use the proceeds of your crypto investments to pay your mortgage, once they’ve been converted into sterling. Remember that converting your profits is a taxable event so you’ll need to make sure you’ve paid any Income Tax and Capital Gains Tax due.
It’s also worth noting that cryptocurrencies can be very volatile and the value of your investment can fluctuate rapidly. Bear this in mind if you plan to use cryptocurrencies to fund your monthly repayments (should this option become available).
Can it be declared in an affordability assessment?
As things stand, lenders won’t consider proceeds from cryptocurrency investments when carrying out their affordability assessments, which is bad news if your crypto profits form a large part of your income.
Concerns over money laundering and volatility make cryptocurrencies too risky in the eyes of lenders.
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Can you use crypto as collateral for a mortgage?
In the US, there are products called crypto-backed mortgages. However, these haven’t launched in the UK yet.
Crypto-backed mortgages let you use your cryptocurrency as collateral to buy a home. With these products, you don’t need to sell your crypto holdings, which means you avoid paying tax charges and you won’t miss out on future gains. As long as you meet your mortgage repayments, you’ll still have your crypto assets at the end of the loan term.
The downside is you may not have enough collateral if the value of your cryptocurrency falls significantly.
Does buying crypto affect your credit score?
No. Information about money you have in current accounts, savings and investments doesn’t appear on your credit reports so buying cryptocurrencies won’t directly affect your credit score.
If you’re concerned about your credit score, head to our credit reports hub to find out how to download your credit reports for free.
Get matched with a broker who specialises in cryptocurrencies
Funding your mortgage deposit with cryptocurrency profits will add a layer of complexity to your application so it’s wise to seek advice from a specialist broker who knows this niche market and who can support you through the process.
Our broker matching service can connect you with an expert who can help you today.
Give us a call on 0808 189 2301 or make an enquiry and get matched with a broker for a free initial conversation.
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