Many Australians have chosen to build wealth by investing in digital assets such as bitcoin and other cryptocurrencies. But could your crypto help you invest in physical assets like real estate by helping you get a home loan?
Given that cryptocurrency is relatively new compared to Australia’s well-established real estate sector, the use of crypto to buy homes is likely to be rare for the foreseeable future. That said, there may be ways to use your crypto wallet to help you apply for a more traditional home loan.
Can you buy a house with crypto?
Using crypto to purchase property could potentially help streamline the transaction on the blockchain, provided both buyer and seller accept crypto as a medium of exchange. That said, it might limit your choice of potential properties.
It is important to remember that although you can buy or sell 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 for the buyer to pay stamp duty and the seller to pay capital gains tax (CGT), although that exemptions and concessions may apply in both cases. Both of these taxes are calculated based on the sale value of the property and must be paid in Australian dollars.
Can property in Australia be bought or sold on the blockchain?
One of the potential benefits of blockchain technology powering cryptocurrency is the streamlining and simplification of digital contracts. Due to the nature of the blockchain as a distributed public ledger, it is theoretically possible for title deeds to change hands more quickly and securely, with fewer needs for assignees to help navigate complex networks of legislation and regulations.
However, in Australia, the infrastructure may not be there yet. Land registries that manage title deeds in Australia are managed by individual states and territories, and some have only recently moved from paper-based systems to digital electronic transfer. While government organizations are no doubt investigating the potential of using blockchain to manage land titles, at this time you may still need to hire a lawyer or transferor to help you transfer title to a property. purchased in 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 you grow your wealth and save a down payment on a mortgage. Putting your money in crypto could potentially earn you higher returns than you would with a savings account or term deposit, even as interest rates rise for savers. However, there is a real risk that the value of your crypto portfolio will plummet, potentially causing you to lose everything. And unlike saving money with an Authorized Depository Institution (ADI) such as a bank, you will not benefit from the government guarantee and the Financial Claims Regime (FCS) with cryptography.
Once your crypto wallet has accumulated enough value, you can liquidate your crypto coins for cold hard cash and use that money to pay off your mortgage deposit. However, you will still need to budget for capital gains tax (CGT) on your sold crypto, so you may not be able to allocate the full value of your wallet to your deposit.
Also, most lenders will only accept a home loan deposit made up at least in part of “genuine savings”. It usually means “money earned through your work”, although money from investments sold can count if the money is in a savings account or time deposit for a certain period, often six months or more. This helps prove to the lender that you can manage the money responsibly, without rushing and spending it, and therefore the risk of defaulting on your home loan is lower.
For more advice on how you might use cryptocurrency as part of a home loan, as well as the potential benefits and risks, consider contacting a financial advisor, tax accountant, or mortgage broker.