Authors: Meredith Yarbrough, Sarah Morton Source: coindesk Translation: Shan Ou Ba, Jinse Caijing

As Bitcoin continues to attract attention as a financial asset, its role in reshaping traditional mortgage lending may signify significant progress in homeownership and the American dream.

Interestingly, witnessing the evolution of crypto products as they integrate real-world use cases rather than just being a currency or store of value. This article explores how Bitcoin is used as collateral as part of mortgage loans.

What can Bitcoin bring to the American dream?

For decades, homeownership has been at the core of the American dream, but the risks for borrowers and lenders have remained consistent throughout market cycles. Borrowers face real estate market fluctuations, negative assets, liquidity constraints, and ongoing tax, insurance, and maintenance burdens. Meanwhile, lenders face risks of borrower defaults, interest rate fluctuations, early repayments, and economic downturns.

While innovative credit managers have started integrating Bitcoin into corporate debt structures, the question arises: can this approach be applicable to mortgage loans to reduce the risks for borrowers and lenders while harnessing the growth potential of Bitcoin?

Your Home: Highly Concentrated Risk

For most Americans, owning property means concentrated financial risk as a large portion of their wealth is tied to a single asset. Property values fluctuate based on market conditions, inflation, and local factors. Homeowners also bear ongoing costs such as taxes, insurance, and maintenance, making it difficult to quickly access liquidity in emergencies.

Bitcoin: an asset with strong liquidity and continuous appreciation.

The fixed supply of Bitcoin and its increasing adoption make it a prominent asset in mortgage collateral packages. Unlike real estate, Bitcoin is liquid and easily convertible to cash, allowing homeowners to access funds more quickly when needed. Its value is driven by scarcity, decentralized nature, and historically strong long-term appreciation, providing potential benefits for borrowers and lenders.

Bitcoin in mortgage collateral packages.

Including Bitcoin in mortgages requires borrowers and lenders to have a common long-term vision. While the short-term volatility of Bitcoin is well known, its long-term appreciation offers significant value growth opportunities. Borrowers and lenders can benefit from this growth while sharing related risks.

In this model, mortgages cover both housing costs and allocations for purchasing Bitcoin. Lenders manage the Bitcoin portion, sharing profits as the value of Bitcoin appreciates. Borrowers' stake in Bitcoin increases over time, encouraging long-term homeownership and reducing the likelihood of early repayment.

Interests of lenders and borrowers.

This mixed collateral structure has significant advantages:

1. Reduces lender risk and diversifies collateral: The addition of Bitcoin diversifies the collateral portfolio, reducing lenders' exposure to the downturn in the real estate market. The unrelated nature of Bitcoin to real estate provides a hedge, enhancing loan stability.

2. The growth potential of bitcoin offsets lenders' risks, enabling more favorable loan terms, including lower interest rates or shorter loan periods.

3. Shared growth potential: Both parties benefit from the appreciation of bitcoin. Lenders can enhance their investment portfolios, while borrowers can acquire continuously growing bitcoin equity, which can be used for liquidity needs or home repairs. This combination promotes long-term financial partnerships.

4. Improving the sustainability of homeownership through asset appreciation: Traditionally, homes require significant taxes, insurance, and maintenance costs. By integrating bitcoin, homeowners can leverage the growth of bitcoin to offset these ongoing costs, transforming typical financial burdens into a more sustainable model.

The new future of homeownership

By using bitcoin as collateral, homeowners can gain an appreciating asset that can help cover ongoing expenses like repairs and renovations without tapping into personal savings or taking on additional debt. This extra flexibility makes homeownership financially sustainable, with bitcoin serving as a reserve for inevitable costs.

At the community level, the positive impact could be profound. Homeowners benefiting from bitcoin growth will have more resources to invest in maintaining their properties, improving overall community health and resilience. This could lead to healthier, more attractive communities and bring new possibilities for sustainable homeownership.

Incorporating bitcoin into mortgage structures can provide a more flexible and growth-oriented relationship for both borrowers and lenders. As the attractiveness of bitcoin as a financial asset continues to grow, its role in reshaping traditional mortgage lending may signify significant progress for homeownership and the American Dream.

What similarities exist between bitcoin and the American Dream?

Essentially, the American dream represents the idea that with hard work and a willingness to succeed, anything is possible. Bitcoin represents individuals taking control of their financial future without relying on central institutions. It is largely aimed at promoting self-sovereignty and freedom.

The core idea of the American dream is that everyone has equal opportunities for success. With Bitcoin, anyone with an internet connection can participate and gain access.

America thrives on innovation and progress due to the entrepreneurial spirit. Bitcoin embodies a technology that drives humanity towards the next era.

How can one use BTC to obtain mortgage loans in the USA market?

I suggest taking a step back and considering. It all starts with evaluating goals and priorities. This is about creating a thoughtful plan rather than focusing on any specific investment. In my opinion, too much of anything is bad, which is why a well-balanced plan between digital assets and traditional assets can actually be very strategic and rewarding.

If someone is too focused on BTC, it may be necessary to discuss how to reduce the risks in their digital asset portfolio, or set realistic expectations and timelines related to homeownership goals. It all comes down to careful planning to efficiently utilize assets or investments. Equally important is to remind oneself that in many cases, renting can actually be a more financially sound decision that aligns better with client needs and overall plans.