Keys to consider if using Bitcoin to pay mortgage
The nation’s second-largest mortgage lender aims to give borrowers the option to pay their mortgages in Bitcoin by the end of the year. United Wholesale Mortgage says it’ll be the first U.S. mortgage company to accept cryptocurrency in exchange for monthly payments.
“UWM is planning to accept Bitcoin because we have nearly one million consumers who pay us a monthly mortgage payment, and we’re always trying to find a way to make things easier for our clients,” says Mat Ishbia, the company’s chairman and CEO.
The move raises familiar questions about cryptocurrency, and whether this virtual money can function as a means of exchange.
“It is nice to know that individuals can pay off their mortgage with cryptocurrency, but because of operational issues for the individual investor, I think very few will,” says Clark Kendall,
a financial advisor who runs Kendall Capital Management.
How will payments work?
United Wholesale is the nation’s No. 2 mortgage lender. It originated more than 560,000 loans in 2020, a tally that trailed only Rocket Mortgage. Ishbia says they will open by accepting Bitcoin. Its total market value is approaching $1 trillion.
The company is still ironing out those 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 ensure we’re doing right by everyone before a change like accepting cryptocurrency comes to pass,” Ishbia says.
Bitcoin’s volatility
Bitcoin has been a subject of intense interest. In September 2020, a single bitcoin traded for a bit over $10,000. By April 2021, the price was flirting with $65,000.
Within months of reaching that high point, Bitcoin plunged below $30,000. It’s on the rise again, nearing $50,000. Bitcoin’s volatility raises a number of challenges. For one, there’s a mismatch between a debt payment denominated in a stable currency and a means of exchange whose price fluctuates wildly.
“If your monthly mortgage payment is $1,000, do you send in $800 or $1,200 worth of Bitcoin for this month’s payment?” Kendall asks.
Thorny tax issues
While tax policies around cryptocurrency are a work in progress, the IRS considers using cryptocurrency to buy something or to pay an expense a potentially taxable event. So the seemingly simple act of trading bitcoins for a mortgage payment could trigger the capital gains tax.
“Using cryptocurrencies to make monthly mortgage payments does not make operational sense in my book,” Kendall says.