01 Mar 2018 · 3 min read

Why Getting Paid in Bitcoin Will Crush Your Hopes of a Mortgage

Income from cryptocurrencies is not considered an acceptable form of income. It might be possible to use your crypto income to pay for a house deposit.

News that a huge company in Japan is giving its employees the chance to get paid in cryptocurrency got us thinking – what happens when you try to apply for a mortgage or other type of loan?

Based on the responses Cryptonews.com received from several banks, it’s not looking good.

Banks are extremely risk-averse and are only willing to lend money against currencies that are regulated in their own country.

Bitcoin is not an acceptable income

Westpac, one of Australia’s “big four” banks, said income from cryptocurrencies “is not currently considered an acceptable form of income for lending purposes”.

It’s not a complete loss, though, as Westpac added that cryptocurrency income can be included as an “asset” as part of its home loan assessment process.

It would effectively be like owning a portfolio of shares. You can’t get a loan based purely on how many shares you own, but the bank will take them into account when looking at your overall state of finances.

Barclays, the UK bank, said it will only lend against income that is in British Sterling, although it might expand this to other currencies in the future. Either way, the loan would always be in Sterling.

Could crypto be used for a house deposit?

It might be possible to use your crypto income to pay for a house deposit, although it depends which bank you use.

HSBC in the UK said the permitted use of cryptocurrencies for a deposit will depend on the agreement with the seller and/or builder of the property being bought.

It added: “Should a customer’s mortgage deposit funds be accumulated from cryptocurrencies, the relevant source of deposit evidence would be required in line with other deposit sources. HSBC does not process virtual currency payments and we do not bank virtual currency exchanges.”

It is already extremely difficult to satisfy banks that deposit funds have been built up in a legitimate way. It would probably be nigh on impossible to do the same with cryptocurrency, particularly given widespread concerns around money laundering.

Atom Bank, a UK challenger bank, explained: “Cryptocurrency platforms are not currently regulated in the UK, and therefore verification of investor’s identity may not have been completed to the standard followed by regulated financial sector firms.

“We and our partners in the conveyancing industry are not able to assure ourselves of the source of funds on these platforms, which is a requirement under the Money Laundering Regulations 2017, and therefore we do not proceed with any mortgage sale involving cryptocurrencies.”

South Korean banks are also declining to issue loans to the country’s many cryptocurrency investors – as they refuse to accept cryptocurrency as collateral.

Small loans are also a challenge

Even getting a small loan to buy a car could prove to be a challenge. A peer-to-peer lender told us that while there is nothing in their terms and conditions that explicitly prohibits lending to borrowers who get paid in Bitcoin, “it is not an income so the answer would probably be ‘no’.”

Receiving a salary in crypto is still extremely rare, but it’s not unheard of for employees working in the blockchain space. It’s also possible we’ll see more companies following the example of GMO, the large company in Japan which started paying employees in crypto at the end of last year.

There will need to be a huge sea-change for banks to be willing to provide mortgages and loans based on a bitcoin salary.

Meanwhile, there are many examples of when successful crypto investors do not need a loan to buy a house or a luxury car. The profit they make from investing is sufficient enough not to bother traditional banks with a loan request.