Non Fungible Token Mortgage (NFT)
But non fungible tokens are not just useful for making digital art and we are only now starting to understand their full potential. In the future, it seems incredibly likely that they will play an important role in the mortgage industry. Read on to find out what NFTs are and why they will be so important in the real estate industry in the future.
What Is A Non Fungible Token?
In the past, all tokens were directly fungible—meaning that they could be easily exchanged for another identical token.
Fungibility is very useful in certain situations and has long been an important concept for currencies like gold or fiat money. Gold can easily be melted down into smaller pieces or added to larger pieces and still maintain its value as gold. Fiat money can be used to pay off a debt or purchase goods and services with very little issue.
For example, if you owe someone $1000, they will accept any one of your $500 bills in order to make the payment for you. But a non fungible token is not identical to another token of the same type. One token may have more value than another, and it is impossible (in our opinion) to exchange one token for another. Essentially, they are entirely unique digital assets with a distinct fingerprint.
NFTs are hosted on a blockchain like cryptocurrencies such as Bitcoin, Dogecoin, and Ether. Ethereum is an example of a blockchain that hosts the crypto coin Ether.
A blockchain works by storing information (such as NFT data) in many different places at once. The chains of encrypted blocks are linked together using hashes, which allows the blockchain to remain secure and decentralized.
How Will NFTs Be Used In The Mortgage Process?
Financial institutions should consider ways to use the blockchain, smart contract, A.I. and crypto in the mortgage process, with some making plans to offer a Bitcoin mortgage that would satisfy the risks involved. The blockchain is so useful in the mortgage process because it allows for the storage of any data without relying on a single entity.
Smart contracts can be written to automatically execute when all of the requirements of the mortgage have been met. So, things like credit checks, loan processing and unbiased quotes and fees etc will all be carried out immediately, without the need for human intervention. All of the information is stored on a decentralized blockchain, so it is completely secure.
In the future, all kinds of ownership rights could be stored in an NFT. Let's take a look at how this might work with mortgages. Imagine if you could store all of the information about a property and a mortgage in an NFT. This includes things like title and ownership documents, property surveys, and land plans. When the property is sold, the NFT is transferred to the new owner. This can all be executed automatically and no one institution has control over the information. It also means that nobody can tamper with the information stored in the non fungible token without anybody noticing.
There has already been an example of a San Francisco landlord selling a lease as an NFT and, in the future, it is likely that the practice will become widespread.
NFTs are already being accepted as collateral for art loans, which is a positive sign, and Beeple sold an NFT for $69 million, showing the major interest in this new technology. As the NFT market becomes more accessible to consumers, it is clear that there could be many other applications for the technology in the future. Many financial institutions should express plans to accept cryptocurrencies as a down payment for home loans, as they already have started to accept crypto as a mortgage payment, so there is no reason why they couldn't do the same with NFTs in the future.
Non-fungible tokens have a variety of uses beyond cryptocurrencies. In the future, they could be used in many different aspects of real estate transactions and this has been recognized by financial institutions. The benefits of this could include increased security and possibly a reduction in fees for consumers. It might also mean that some of the problems associated with home ownership can be simplified, like transferring the property to a new owner when selling without having to wait a week just for a title commitment. By using NFTs rather than fiat currency, sellers should know exactly what they are receiving from the transaction as there is no fluctuation in value.
Although the technology is still in its infancy, it seems incredibly likely that non fungible tokens will be a vital part of the mortgage industry in the near future.
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