Maximising Property Investment with Crypto and Securities-Backed Financing

Lending against securities or cryptocurrency is becoming an increasingly popular option for those looking to purchase property globally. These assets are highly liquid, meaning you don’t need to go through lengthy valuations or legal procedures to determine how much you can borrow against them. Lenders can easily assess their market value, and you can raise funds quickly. In some cases, you might even be able to access loan-to-value (LTV) ratios as high as 100% for cryptocurrency-backed loans.

With the rise in property rates, securities lending remains competitive, with interest rates starting as low as 2% for buy-to-let (BTL) investments, offering attractive opportunities for investors. Below, we explore the options and key considerations when utilising securities or crypto-backed financing for property purchases.

Available Options for Crypto and Securities Lending

When it comes to borrowing against securities or cryptocurrency, there are regulated and unregulated options. Choosing the right lender and loan type will depend on your personal financial goals and risk tolerance.

Option 1: Unregulated Crypto Lending

This option is fast, flexible, and cost-effective, with interest rates starting from 2.5% and LTVs of around 70% for BTC (Bitcoin). Here’s how it works:

1. Transfer your cryptocurrency to the lender. The coins will be locked up for the loan term.

2. Loan terms range from 18-24 months with no prepayment options.

3. Funds are transferred to your account in USD (or another fiat currency), which you can use as you wish.

4. Upon maturity, you’ll repay the loan principal and receive your crypto back at its market value at that time.

Option 2: Regulated Crypto Lending

This option offers greater flexibility and can get you funds in as little as 4 weeks, with rates starting from 5.5% and LTVs between 50-60% for BTC. It’s more secure, especially for large sums or long-term loans:

1. Set up an account with the lender and transfer custody of your crypto. You remain in control of your coins, allowing you to buy, sell, or trade if your collateral remains above the required threshold.

2. Loans are evergreen, you can pay off or increase your loan as you wish without prepayment penalties.

3. Loan funds are transferred to your account in CHF, USD, EUR, GBP, or SGD.

4. Once the principal is paid off, all payments cease, and you retain full control over your crypto assets.

Key Considerations for Property Financing

When deciding between crypto-backed loans or Lombard (securities-backed) financing, there are several factors to consider, including the purpose of the property purchase (investment or primary residence), your financial situation, and the specific lender's offerings.

Investment Properties

For investment properties, maximising yield is crucial. You’ll likely be rate-sensitive, so consider a fixed-rate loan with low interest rates starting from 2.5% for both crypto and Lombard assets. This will help you maintain a strong cash flow.

Main Residence Purchases

If purchasing a primary residence, security and long-term stability are key. Lombard loans often come with benefits such as relationships with regulated tier 1 institutions that don’t require a minimum £2m AUM (Assets Under Management) to qualify. For crypto-backed loans, we can assist with the  set up of bespoke wallets with enhanced security features, backed by tier 1 custodians.

Development Finance

For development projects, flexibility is paramount. Many lenders offer no minimum or maximum terms, allowing you to adjust your loan amount without incurring additional fees.

General Considerations When Borrowing Against Crypto and Securities

• Margin Calls: A margin call occurs when the value of your collateral falls below a certain level. It’s important to note that securities loans are non-recourse, so your other assets aren’t at risk. If a margin call happens, the lender will liquidate the collateral to recover the loan amount, and you retain the loan funds.
• Preparing for a Margin Call: To avoid a margin call, you can either reduce your loan amount or increase your collateral by adding additional assets or cash. If necessary, some lenders may recommend a sale and buyback strategy to help manage fluctuations in market value
• Underlying Security: Not all securities are equal in terms of risk. Safe, stable assets like UK gilts, bonds, and ETFs are great for low-risk lending. However, more volatile securities may require extra caution when leveraging your position
• Term Length and Lock-Up Periods: Many securities lenders offer flexible loan terms with no prepayment penalties. Some may also allow you to manage your own portfolio during the loan, while others may require a lock-up period, in exchange for more attractive rates

Lending against cryptocurrency or securities offers a competitive and alternative way to raise capital for purchasing property. There are flexible options available that allow you to maintain control over your assets while benefiting from attractive financing terms.

If you're interested in exploring your options further, contact Enness today to discuss how we can utilise our partner network to aid you in the leverage your crypto or securities to secure the financing you need for your property purchases.