Figure Lending LLC introduced a new way to finance the purchase of real estate properties: crypto backed mortgages. Will this new product take off?
Table of Contents
- Who Is Figure Lending LLC?
- What Are Crypto Backed Mortgages?
- Is Figure Lending Legit?
- What Other Companies Offer Crypto Backed Mortgages?
- Find Investment Properties Within the Price Range Using Mashvisor
- Final Thoughts
Securing enough cash for a down payment to get a mortgage has always been one of the biggest challenges of purchasing real estate.
In the last decade, this has been further exacerbated as people started dumping their savings into cryptocurrency.
This meant that when investors wanted to purchase a property, they often wouldn’t have enough cash at hand to make a substantial down payment without having to sell their crypto and use its long-term value.
However, Figure Lending is one of the new innovators that have addressed this problem and opened up a new horizon for investors to incorporate their crypto assets in their real estate investments.
Who Is Figure Lending LLC?
Figure Lending LLC (doing business as “Figure”) is a company that offers crypto backed mortgages to homebuyers that meet their criteria as money lenders.
Loans offered by Figure function similar to other types of mortgages in that they have a certain range, interest rate, credit score requirement, and a selection of payback duration options.
The biggest difference, however, is that the mortgages offered by Figure Lending are backed by cryptocurrency.
Figure’s vision revolves around the idea that the blockchain will fundamentally alter the way financial institutions do business around the world.
And the company’s performance thus far has certainly proven the existence of high demand for the mortgages they offer.
Since its inception, they have helped more than 30,000 households and have provided more than $2B in equity for its members.
Figure Lending – Mortgage Specifications
Here’s a closer look at what they offer:
- Loan types offered: HELOC
- APR range: As little as 3.5% APR
- Loan amount range: $15,000 to $400,000
- Min. Credit Score Required: 620
- Repayment Terms: 5, 10, 15, or 30
- Average time for loan approval: 5 minutes
As you can see, the mortgages offered by Figure don’t really stand out when you don’t consider the fact that they’re backed by cryptocurrency.
The type of mortgage offered means that you can only qualify for this loan if you’re buying one of the specific types of properties, which is limited to:
- Single family homes
- Townhomes
- Most condos
This means that, as an investor, your options are limited and you won’t be able to use this loan to finance the purchase of a commercial-type real estate.
Another limitation is the loan amount range, especially considering the inflated prices in today’s market.
A maximum of $400,000 will definitely limit your options when it comes to markets you can afford.
However, the rest of the mortgage specifications are positive, as it offers flexible ranges, and its APR is lower than the average HELOC rate of 4.61%.
Related: The Real Estate Investor’s Complete Guide to Mortgage Rates
What Are Crypto Backed Mortgages?
Now that you know what Figure Lending is and the type of mortgages it offers, let’s talk about the unique thing about them: crypto backed loans.
As I said earlier, crypto backed mortgages are similar to any other type of mortgage.
The main difference is that in the case of a crypto backed mortgage, you don’t have to pay a cash down payment.
Instead, if you own crypto assets, you can use your crypto as collateral based on its current market value.
What this means is that the current dollar value of your crypto assets can be used as a down payment for your loan.
As expected, this creates some complications when compared to conventional mortgages, as we will see shortly.
However, it is worth mentioning here that this new and innovative form of lending isn’t available everywhere.
As it is a new form of lending that can transform the financial services industry, many states are reluctant to introduce it in their markets.
Related: A Guide to Financing Airbnb Properties
Difference Between Crypto Backed Mortgages vs Conventional Mortgages
The main difference between a crypto mortgage and a conventional mortgage is that one is backed by cryptocurrency while the other requires a cash down payment.
However, when it comes to the long-term aspects of a crypto backed mortgage, there is one major characteristic of cryptocurrency which needs to be factored in: volatility.
Since cryptocurrencies are fairly volatile, this means that the value of your mortgage collateral can change over time.
This may result in one of two scenarios:
1- Cryptocurrency Value Increases
If the value of the currency that you’re using as collateral increases, then you will be able to tap into the increased amount.
For example, let’s assume that you’re using Bitcoin as collateral and that Bitcoin’s value was $50,000 at the time of your loan approval.
Now, let’s assume that shortly after the value of Bitcoin goes up by 50%.
This means that the value of the same Bitcoin that you have used as collateral is now $75,000, but your collateral is $50,000.
This frees up part of your collateral as it allows you to tap into an amount of Bitcoin equal to $25,000 out of the original amount that you have used as collateral.
2- Cryptocurrency Value Decreases
If the value of the currency decreases, however, then it would trigger something called a margin call.
This means that you, as the borrower, will be required to deposit more crypto to raise the LTV back to its original level.
There is some argument, however, that as your equity in the home is building up, the real estate value of the property will become large enough to cover part of the collateral and help neutralize or even out the crypto collateral.
It’s important to keep in mind that the value of real estate increases at a much slower rate than cryptocurrency.
So, while the above can be helpful in the long term, you might still suffer losses in the short term if the value of your crypto down payment decreases.
Is Figure Lending Legit?
Yes. Figure Lending is a legit growing company that has helped finance real estate purchases for over 30,000 households across the US.
This means that it has stable finances, which enables it to function as a money lender just like any conventional lender.
Additionally, as a mortgage provider, Figure Lending is superior to any conventional lender in terms of its service speed and closing costs.
Since it operates online, the platform is able to process and approve your request in as little as 5 minutes.
You will also avoid several closing fees, such as home appraisal since Figure offers an automated home valuation service.
Finally, it provides online access to borrowers’ accounts and week-round customer support services.
What Other Companies Offer Crypto Backed Mortgages?
As you might expect from a new financial market, many other companies started offering crypto backed mortgages in areas where it is allowed due to the potential and high demand for such service.
While Figure Lending is one of the most well-known and trusted companies that offer crypto mortgages, there are other companies that provide crypto backed loans, such as:
- BlockFi
- Celsius
- Unchained Capital
Of course, each of these companies has its own mortgage specifications in terms of loan duration, interest rate, credit score, and more.
On average, though, the annual percentage rates range between 1.0% and 6.0%.
Additionally, while Figure focuses on mid-range homebuyers, other companies will either focus on helping unbanked buyers or on lending to high-net-worth investors as their main clientele.
Related: How to Choose the Best Mortgage Lenders
Find Investment Properties Within Your Price Range Using Mashvisor
Now that you know what Figure Lending and crypto backed mortgages are, it’s time to think about your next step toward investing in real estate.
If you’re considering using Figure’s crypto mortgage, then you want to start by searching for markets where property prices are around the range of $400,000.
After that, you will want to analyze that market to be able to identify investment properties that are viable for your investment.
Analyzing properties within that market will also tell you what a traditional or vacation rental property is expected to generate in terms of return on investment.
Finally, you will need a rental property calculator to factor in all the costs and expenses, including your mortgage payments, to calculate the cap rate of the investment property.
Luckily, Mashvisor is a platform that does all of that and more!
Investment Property Search Using Mashvisor
Mashvisor’s investment property search feature utilizes a satellite map interface in combination with several basic and advanced filters to enable you to find the best place to buy rental property.
In addition to filters for the property’s price, type, size, and age, Mashvisor’s tool lets you search for markets and properties based on:
- Property’s rental income
- Cap rate and cash on cash return
- Occupancy rate
- Rental strategy (traditional vs Airbnb)
While using this tool, you will also be able to get more detailed info about each market or property by simply hovering over them on the map.
By clicking on any listed property, you will be taken to a page that contains the property’s photos as well as relevant info, such as its owner, features, and detailed analytics.
Mashvisor’s Investment Property Search page offers a quick overview of the available properties for sale in a particular city or neighborhood.
Investment Property Calculator and Analytics
If you’re using Figure Lending to borrow money, you will need to include that in your calculations.
Mashvisor’s property analytics page lets you do that.
The rental property calculator tool within each property’s page on the platform includes a section for a mortgage calculator.
This calculator is part of the analytics page, which means that any input you make on the mortgage calculator will be reflected in that property’s analytics and long-term forecasts.
The changes you make will be most noticeable in the cap rate calculator as the mortgage payments are factored into its return on investment calculations.
Both of these calculators are customizable, and you can even add custom types of expenses and income sources to make the results more accurate based on your specific case.
Use Mashvisor’s Investment Property Calculator to incorporate your Figure Lending mortgage terms and estimate if the profitability of your investment with crypto backed financing.
Final Thoughts
Figure Lending and other mortgage lenders are now providing a unique method of financing your real estate investment.
While the type of mortgage they offer may present some challenges to serious investors due to the limited amount of money you can borrow, these challenges can be overcome.
The main benefits that you get from using Figure for a crypto mortgage can be worth it, especially if you’re creative.
Generally, Figure is for anyone who has a substantial amount of cryptocurrency that has accumulated value over the years but doesn’t want to withdraw that currency and lose its long-time appreciation value.
If you’re that person, and you just found out that you can actually use your cryptocurrency to get a mortgage and buy a house, then you’re in luck.
By using Mashvisor, you will be able to find investment properties that qualify for a Figure mortgage in terms of their price and type.
You will also be able to find properties that match the criteria and that also have great potential for long-term profits if you rent them out.
So, not only will you be using your crypto investment to buy a real estate property, but you will even be able to generate more income and make a larger profit from your investment property.
To start using our real estate investment tools today, click here to sign up for a 7-day free trial followed by 15% off for life on your Mashvisor subscription.