Bitcoin-Backed Mortgages Emerge as New Option for Homebuyers

A new mortgage product has been launched by Better Mortgage and Coinbase that allows homebuyers to use their bitcoin as collateral for a down payment. The product, which is open to all U.S. applicants, pairs two loans at closing: a standard Fannie Mae-conforming mortgage secured by the home, and a down payment loan secured by the borrower's bitcoin and a second lien on the property.

The bitcoin-backed mortgage has already seen pre-applications reach $360 million in requested loan volume since its public launch. Borrowers must pledge bitcoin at a 250% collateral ratio, meaning they can use $250,000 in bitcoin to cover a $100,000 down payment on a $500,000 home.

Better Mortgage may rehypothecate the pledged bitcoin, which means it can reuse the collateral while promising to return an equivalent amount later. However, this exposes borrowers to Better's ability to return that bitcoin, which could be decades away for a 30-year mortgage.