If you are of the growing number of people to have amassed a considerable amount of money in cryptocurrency, then it could well be that you are now looking at investing it in a more reliable way. And, as property has long been regarded as a safe way to make the most of savings, buying a home with this currency could indeed be an attractive prospect. Yet doing so may not be as straightforward as buying with traditional financial means.
Cryptocurrency And Mortgages
If you already own a property and have a mortgage taken out on it, then it could well be possible to make your future payments with funds raised through cryptocurrency. In order to do so, however, you would have to sell your cryptocurrency and use the proceeds to pay your mortgage. Converting digital currencies to traditional money through selling is known as “fiat”.
Furthermore, your mortgage lender will possibly need to have assurances that your income from digital currencies has been verified in order to eliminate the risk that you would be making payments with funds that have undergone money laundering. Achieving a paper trail that can prove the legitimacy of your money can be difficult, and as many mortgage lenders are not expert in digital currencies, resolving the issue can take time, which leads to the next challenge to the process.
Speed Is Essential
As bitcoin and other cryptocurrencies are digital money, rather than being regulated by a national bank or government, they are particularly liable to fluctuations in value. Since the beginning of the year, bitcoin alone (the most popular cryptocurrency) has plummeted to record lows and with the continuing uncertainties created by the war in Ukraine, this trend looks unlikely to improve anytime soon.
This means that if you hope to use such funds to pay for a large purchase such as a house, you will need to ensure that the sale goes through very quickly in order to guarantee the best conversion rate. Simply put, your completion and exchange will need to take place at the same time to ensure that the right amount is paid for the property in question: otherwise, the seller could end up losing money should the cryptocurrency fall in value during the process, or similarly, if the value of the currency surged, the buyer could end up paying more than the market value for the property. This all means that whilst buying a house or flat with cryptocurrency is possible, it isn’t a straightforward process.
If you are looking for advice on any aspect of conveyancing in Hemel Hempstead or elsewhere, including using bitcoin or other digital currencies, then it is certainly worth approaching a property and conveyancing specialist such as Sam Conveyancing, who can offer the most up-to-date insights into the property market in this area.
Remember The Tax Requirements
Here in the UK, it is important to adhere to the necessary tax regulations relating to cryptocurrency if you want to use these funds for any purpose, including paying for a property. At present, cryptocurrencies such as bitcoin are classified under the Capital Gains Tax regulations, which means that there is an tax exemption for cryptocurrency income of up to £12,300 a year. If you are earning more than this amount from digital currencies in a year, then it is essential that you declare this income to HRMC and pay the applicable rate of tax. Failing to do so can lead to heavy penalties, such as having a Suspicious Activity Report lodged against you with HRMC.