Can your crypto help you get a home loan?

Many Australians have chosen to build their wealth through investment in digital assets such as bitcoin and other cryptocurrencies. But could your crypto help you invest in in bricks and mortar assets such as real estate by helping you secure a home loan?

Because cryptocurrency is relatively new compared to Australia’s well-established property industry, using crypto to buy houses is likely to be a rare occurrence for the foreseeable future. That said, there may be ways to use your crypto portfolio to help you apply for a more traditional home loan.

Can you buy a house with crypto? 

Using crypto to buy a property could potentially help to streamline the transaction over the blockchain, provided both the buyer and seller accept crypto as the medium of exchange. That said, this could limit your choice of potential properties.

It’s important to remember that even if you can buy or sell a property using crypto, Australian dollars may still need to be involved in the transaction. Part of the settlement process when buying or selling property in Australia is the buyer paying stamp duty and the seller paying Capital Gains Tax (CGT), though exemptions and concessions may apply in both cases. Both of these taxes are calculated based on the property’s sale value, and must be paid in Australian dollars.  

Can property in Australia be bought or sold on the blockchain? 

One of the potential benefits of the blockchain technology that powers cryptocurrency is the streamlining and simplification of digital contracts. Due to the nature of the blockchain as a distributed public ledger, it’s theoretically possible for property titles to change hands more quickly and securely, with less need for conveyancers to help navigate complex webs of legislation and regulation.

However, in Australia the infrastructure may not be there yet. Land registries that handle property titles in Australia are managed by the individual states and territories, and some have only recently moved away from paper-based systems to digital e-conveyancing. While government organisations are no doubt investigating the potential of using blockchain to manage land titles, for the time being you may still need to hire a solicitor or conveyancer to help you transfer a purchased property’s title into your name.

Can I use crypto for a home loan deposit? 

The Reserve Bank of Australia (RBA) does not consider bitcoin or other cryptocurrencies to be legal tender in Australia. This means that most banks and other mortgage lenders are unlikely to accept crypto as a home loan deposit.

However, it may be possible to use crypto to help grow your wealth and save up a deposit on a mortgage. Putting your money into crypto could potentially earn you higher returns than you would with a savings account or term deposit, even if interest rates are rising for savers. However, there’s a real risk that the value of your crypto portfolio may crash, potentially losing you everything. And unlike the money saved with an Authorised Deposit-taking Institution (ADI) such as a bank, you won’t get to benefit from the government guarantee and the Financial Claims Scheme (FCS) with crypto.  

Once your crypto portfolio has built up enough value, you could liquidate your crypto coins for cold hard cash, and use this money to pay for your mortgage deposit. However, you’ll still need to budget for Capital Gains Tax (CGT) on your sold crypto, so you may not be able to put your portfolio’s full value towards your deposit.

Also, most lenders will only accept a home loan deposit that’s at least partly made up of ‘genuine savings’. This typically means ‘money earned from your job’, though money from sold investments may count if the cash is in a savings account or term deposit for a length of time, often six months or more. This helps prove to the lender that you can manage money responsibly, without rushing out and spending it, and therefore the risk of you defaulting on your home loan repayments is lower.  

For more advice on how you could use cryptocurrency in relation to a home loan, and the potential benefits and risks involved, consider contacting a financial adviser, tax accountant, or a mortgage broker.

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