Bitcoin investors can get mortgages… but could see choice curbed
Prospective home buyers have reportedly run into problems when trying to use cash gained from Bitcoin investment profits as a deposit.
The primary concern for lenders is around falling foul of anti-laundering money rules, and some may reject an application if they are not satisfied the cash has come from a valid source.
A spokeswoman from the Building Societies Association said: “In a case where a customer has been legitimately trading in Bitcoin or any other cryptocurrency, and has a verifiable audit trail to show where the money they are putting up as a deposit has come from, there is a reasonable chance of the proceeds being accepted by a lender.
“However, cryptocurrencies are currently unregulated which puts them into the highest risk category in relation to money laundering.
“Right now, the use of proceeds derived from trading in cryptocurrencies is comparatively new and is still pretty rare so there is limited familiarity with them.
“This means that at the moment the use of proceeds from cryptocurrencies is a higher risk for financial service providers and there may as a consequence be less appetite to accept them – it is not a black or white situation.”
Part of the problem is also that providers are typically slow to react to changes relating to the profile of borrowers, according to Dominik Lipnicki, director at Your Mortgage Decisions (YMD).
He said: “There are real issues with lenders accepting Bitcoin income or profits to obtain a mortgage.
“First, lenders are always slow to change their criteria, especially when a new or nonstandard way of earning an income is needed to justify affordability – we have seen similar problems with zero hour contracts and lending into retirement.
“Some lenders still do not have a policy on Bitcoin income, which to me still seems very strange considering how many people have invested in the currency.”
Prove the source of income
For borrowers the key is to provide a paper trail, documenting where cash has come from.
In the case of Bitcoin, this means proving money left their account and came back in – this could be as little as an email documenting the trade, according to Ray Boulger, senior technical manager at mortgage broker John Charcol.
He said Bitcoin-related profits are a problem for some lenders, but many will accept it.
This could also hinge on how long the money has been in their account; a lump sum recently deposited may trigger questioning, whereas money that has been in their account for a number of months may not.
Boulger added: “The borrower has to be able to prove where money has come from.
“In the worst case, your lender choice is restricted.”
If the lender doesn’t ask for proof of funds – a solicitor might.
This is not just limited to money coming from bitcoin or cryptocurrencies.
For example, a friend or family member who has gifted a deposit may be asked for a letter to confirm the gift – and in some cases are also required to prove the origins of the cash.
Boulger said the deposit size can also affect whether a paper trail is needed, with a lender less likely to ask about a £10,000 deposit compared to a £50,000 one.