A software engineer has taken decentralized finance to a new level of practicality, by pay your mortgage at the Commonwealth Bank of Australia and refinance the loan through Notional Finance, the fixed rate loan protocol.
The move marks an important step for the nascent DeFi sector, and more fixed-rate lending protocols in DeFi may attract more users seeking long-term investment and lending stability., like mortgages. Today, the ecosystem is largely populated by yield farmers looking for quick returns on their crypto collateral.
The DeFi engineer attempted the process through TradFi by seeking an offsetting loan, which directs interest from a savings account toward a mortgage payment.
However, in statements to The Defiant, the borrower stated that banks are very cautious when granting loans in times of economic uncertainty, especially to the self-employed. He added that he had been denied a basic credit card for four years.
Notional Finance offers loans at a fixed interest rate for up to six months to users who deposit a crypto collateral in wrapped BTC, ETH, wrapped ETH, or DAI.
However, the procedure is far from simple and novice friendly.. The engineer had to pay off his bank loan in AUD first. It then had to borrow from Notional the USDC stablecoin, pegged to the dollar, at a fixed interest rate, providing its own liquidity to avoid slippage and rates on the new low-volume platform.
Then, added about $ 1 million in wBTC and wETH as collateral to Notional, against which it borrowed about $ 500,000 in USDC, which were converted to AUD to pay the bank. Said:
“I feel like I am in complete control of my situation. People should be aware of all this.”
The interest rates in Notional Finance for USDC are approximately 6%, but part of that amount can be recovered with the benefits of the provision of liquidity. There is the added benefit of holding a position in a bull market without having to sell crypto assets and incur a taxable capital gain.
Added that the process was quick compared to traditional finance:
“It seemed to me that it would have taken months of applications, searching for tax returns and bank statements for the bank to refinance me, but I was able to do it all in one day, under my own management.”
Aave, a leader in DeFi protocols, has also started down the mortgage path with its latest partnership. In a ad conducted on February 2, Aave stated that the scheme was in collaboration with RealT, a firm that tokenizes real estate to allow users to stake their property as collateral for borrowing. The ability to use these assets as collateral is the first step in making Ethereum “home loans” available to a wider audience.
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