Crypto-Backed Mortgages Come With New Trade-Offs
Crypto-backed home financing is gaining traction, but it comes with new trade-offs for borrowers. Better Mortgage's recently launched program allows homeowners to pledge Bitcoin as collateral for a down payment loan. The lender may reuse the pledged Bitcoin if it maintains an equivalent amount for return at payoff.
The program combines two loans: a Fannie Mae-conforming first mortgage and a second loan secured by the pledged Bitcoin and a second lien on the property. Borrowers must pledge Bitcoin worth at least 250% of the down-payment loan, meaning $250,000 in Bitcoin would support a $100,000 loan.
Better Mortgage's crypto-backed mortgage page describes the release of pledged Bitcoin in two ways. One section says it remains in custody for the life of the down-payment loan and is returned when that loan is repaid. Another says it is returned after the conforming mortgage is repaid or refinanced.
The structure protects borrowers from price-driven margin calls, as a decline in Bitcoin's value will not require additional collateral or trigger a sale. Better Mortgage may liquidate the Bitcoin if a borrower remains delinquent for 60 days, while foreclosure proceedings on the home would begin separately after 180 days.