Bitcoin Down Payments Come with No Guarantee on Coin Return
Better and Coinbase's new mortgage product is making it possible for homebuyers to use their Bitcoin as a down payment. However, there's a catch: the company does not guarantee that the same coins will be returned to the borrower.
The product allows borrowers to take out two loans simultaneously - one standard mortgage secured by the home and another covering the down payment, which is secured by both the Bitcoin and a second lien on the property. The Bitcoin itself does not help meet the income, credit score, or debt-to-income ratio requirements for the primary mortgage.
According to company statements reported by CoinDesk, the Bitcoin is transferred from the borrower's Coinbase account to Better's custody account on Coinbase Prime at closing. A 250% collateralization ratio is applied at the start of the loan, meaning $2.50 worth of Bitcoin is required for every $1 of the down payment loan.
The Bitcoin is not released until the mortgage is fully paid off or refinanced, which can extend up to 15 or 30 years. A drop in Bitcoin's price alone does not trigger a margin call, but if the combined loan payment is missed, Better can liquidate the Bitcoin 60 days after notice.