Cryptocurrency mortgage deposit guide for UK crypto mortgages
Many mortgage brokers and lenders aren’t sure where to start when it comes to cryptocurrencies such as Bitcoin. While Bitcoin has been a lucrative investment, its volatility and inability to trace its origins have made it less useful for property purchases in the UK.
This guide to cryptocurrency and mortgages will dispel some myths about buying a property with Bitcoin or other virtual tenders.
This guide will explain whether cryptocurrency can be used to make a mortgage deposit, pay off an existing mortgage, or declare it as income to a mortgage lender for affordability assessments.
You can use Bitcoin or any other cryptocurrency to make a mortgage deposit.
Although you cannot use cryptocurrency as a deposit for a mortgage, you can use the profits to fund your deposit. To be able to find a mortgage lender willing to accept the capital, you would need to sell it and keep a record of its purchase and sale. It’s not easy, as there are very few mortgage providers lending who will accept your capital crypto wealth.
Many online mortgage advisors will refuse to lend you money if your deposit is made up of Bitcoin profits. An online mortgage advisor would be wary of funds that can’t be traced back. However, there are around 12 UK lenders that accept Bitcoin mortgage deposits.
Mortgage lenders that accept crypto mortgages or applications that are based on Bitcoin profits will usually have strict conditions. The lender would want to see proof that the crypto funds could be traced and converted into sterling.
To double-check that there is no evidence of money laundering, some lenders will refer Bitcoin deposit applications to the financial crime unit. To prove the contribution trail, they might request digital assets or a statement from the platform or a bank statement.
What mortgage companies will accept Bitcoin deposits?
As of April 2021, there were six UK mortgage companies accepting Bitcoin-based deposits. These lenders can be a mix of specialist lenders, banks and building societies. We will explain why it is not advisable to approach one of these lenders directly.
You are more likely to be rejected if you apply for a mortgage using a cryptocurrency deposit.
There are only a few options for lending, so there is a lot of room for error in choosing a mortgage provider. Even if they accept Bitcoin, it’s not a guarantee that you will find the right lender for your circumstances and needs.
A specialist mortgage broker can help you find the right lender. A specialist mortgage broker who specializes in cryptocurrency-based deposits will narrow down the number of lenders that accept them and match you with the best mortgage provider to offer you the best deal.
Our broker-matching service is free and can match you with the right expert. This person has the knowledge and experience in cryptocurrency mortgage deposits as well as a track record of helping people get on the property ladder.
Is it possible to declare cryptocurrency income in a mortgage application?
At the moment, this is not possible. Because cryptocurrency can be volatile, mortgage lenders won’t allow it to be declared income in their affordability checks. This makes it difficult for banks and other financial institutions to determine the risk level. It’s also more difficult to verify the source of Bitcoin or other crypto capital sources if it’s the borrower’s main income.
Does this mean that it is always likely?
Not necessarily. The cryptocurrency market is still young and the industry may adopt a common position depending on how stable it becomes. This could open the door to Bitcoin mortgages.
However, they are unlikely to become mainstream any time soon. The volatility of virtual currency means that any products that do become accessible will likely have high deposit requirements and strict eligibility criteria to offset some risk.
Our network’s mortgage broker has confirmed that a major lender in Ireland is reviewing their position on cryptocurrency income in the hope of possibly introducing mortgages based upon this.
Keep this in mind when you are applying for a mortgage and Bitcoin is your primary source of income. They will know the latest market information and be the first to inform you about cryptocurrency mortgages.
Can you pay your mortgage using cryptocurrency?
Yes, you can make payments on an existing mortgage using profits from cryptocurrency. However, this would mean that you would have to convert the currency into cash.
This is legal only if you have reported this income to HMRC and paid tax on any gains. Capital Gains Tax regulations tax Bitcoin and other virtual currencies. This means that they are exempt from paying the £12,300 per year tax.
You will need to declare any cryptocurrency income that exceeds this amount and pay the appropriate tax. If your lender discovers that you have not declared this income, they can file a Suspicious Activity Report at HMRC, which could land you in serious trouble.
Is it possible to pay off a mortgage using Bitcoin?
While you could pay off your existing mortgage using cryptocurrency profits, some mortgage providers may want to verify the source of your funds to eliminate any concerns about anti-money laundering.
If cryptocurrency is listed as the source, the lender will only consider your request if the capital has been verified, declared, and the relevant taxes have been paid.