Coinbase has partnered with Better Home & Finance Holding Co. to introduce crypto-backed mortgages, allowing borrowers to use digital assets as collateral for home purchases. The loans are structured as conforming mortgages backed by Fannie Mae, meaning they follow the same standards and protections as traditional home loans.
The product enables buyers to pledge assets such as Bitcoin or USDC instead of liquidating them for a down payment. This approach allows borrowers to retain ownership of their crypto holdings while avoiding potential tax liabilities associated with selling assets.
Addressing a Key Barrier to Homeownership
One of the biggest challenges for prospective homeowners is assembling a sufficient down payment. According to Better, a large portion of potential buyers are unable to purchase homes despite having assets in investments or savings vehicles.
By using crypto as collateral, borrowers can unlock liquidity without navigating complex tax events or selling long-term holdings. For example, a buyer purchasing a $400,000 home might struggle to produce a $40,000 down payment in cash, even if they hold sufficient value in crypto assets.
This structure aims to simplify the process by allowing Coinbase users to transfer their assets into a custody wallet managed in coordination with Better, while still maintaining ownership rights.
Loan Structure and Risk Management
The crypto-backed mortgages come with slightly higher interest rates than traditional 30-year loans, typically ranging from 0.5% to 1.5% above standard rates depending on the borrower’s profile. However, the structure includes features designed to reduce volatility-related risks.
Notably, the loans do not involve margin calls or collateral top-ups if the value of the pledged crypto declines. Market fluctuations alone will not trigger liquidation, offering borrowers greater stability compared to other crypto-backed lending products.
Collateral is only at risk if the borrower becomes delinquent on mortgage payments for an extended period, typically 60 days, aligning the structure more closely with conventional mortgage practices.
Expanding Access Beyond Wealthy Investors
Crypto-backed lending has historically been associated with high-net-worth individuals and wealth management strategies. However, this initiative is aimed at mainstream homebuyers, positioning it as a more accessible financial tool.
Executives at Coinbase described the product as a way to democratize access to homeownership, enabling individuals to leverage their digital assets similarly to how affluent clients use traditional securities as collateral.
Bridging Crypto and Traditional Finance
The partnership reflects a broader trend of integrating digital assets into traditional financial systems. By combining crypto collateral with regulated mortgage frameworks, Coinbase and Better are effectively bridging two previously separate financial ecosystems.
As housing affordability remains a challenge and digital asset ownership grows, crypto-backed mortgages could become an increasingly viable option for buyers. The initiative signals a shift toward using blockchain-based wealth not just for investment, but for real-world financial applications like homeownership.
