As companies like Milo and Figure announced offerings of new crypto-backed mortgages, homeowners and homebuyers are curious to know how they work.

In a Business Insider article, Richard Levin, partner and chair of the Fintech and Regulation Practice at Nelson Mullins, discusses the risk of these new mortgage offerings, including a potential for homeowners and buyers to bring more money into the transaction than originally planned or anticipated: “Anyone that has a digital asset that is posting that as collateral for their loan should proceed with a degree of caution.”  

Due to the volatility of cryptocurrencies, lenders may ask for additional collateral if the value of a borrower’s cryptocurreny drops significantly. Levin said homeowners and buyers should ensure they understand the lender’s rules for situations like this before entering into an agreement.