Better and Coinbase Let Bitcoin Be Reused as Mortgage Collateral
The setup ties a Fannie Mae mortgage to a bitcoin-backed down payment loan through Coinbase Prime. Reusing collateral raises fresh questions about risk and protection after FTX, Celsius, and BlockFi.
Key Takeaways
- Better Mortgage and Coinbase are offering a bitcoin-backed mortgage where the BTC collateral can be reused.
- The buyer gets two loans: a regular mortgage for the home and a separate loan for the down payment, backed by bitcoin.
- The bitcoin collateral stays locked up until the conventional mortgage is paid off or refinanced, even if the down payment loan has already been repaid.
Better Mortgage and Coinbase have made a new bitcoin-backed mortgage widely available that lets the pledged BTC collateral be reused. For homebuyers, that means their bitcoin stays locked up until the regular mortgage is paid off or refinanced, even if the separate down payment loan has already been repaid.
How the Loan Works
When the loan closes, the buyer gets two loans. The first is a standard mortgage that meets Fannie Mae requirements and is backed by the home. The second loan funds the down payment and is backed by the customer’s bitcoin, plus a second lien on the same home.
The bitcoin-backed loan starts at a collateral ratio of 250%. In Better’s example, a buyer of a $500,000 (€430,200) home would need to pledge $250,000 (€215,100) worth of bitcoin to finance a $100,000 (€86,000) down payment. Both loans are issued by Better and collected through one monthly payment. At closing, the bitcoin moves from the customer’s Coinbase account to Better’s custody account on Coinbase Prime.
Better says it may reuse the pledged bitcoin collateral as long as it keeps an equivalent amount available to return. Coinbase only acts as the custodian and technology partner here, and does not make lending or liquidation decisions.
What This Means for Customers
The setup does not count bitcoin as income for the first mortgage. Applicants still have to meet the usual requirements for income, credit score, and debt load. Better says the product only solves the cash problem for the down payment.
Another notable point is that customers cannot simply get their bitcoin back early by paying off only the second loan. The collateral stays locked until the conventional mortgage is fully paid off or refinanced. If the home is sold, the down payment loan has to be repaid first before the bitcoin is released.
Why This Stands Out
The setup fits into a broader debate about collateral reuse in crypto. After the collapse of FTX and the problems at Celsius and BlockFi, this topic has become especially sensitive, because customers often only realized later how risky asset reuse can be. In this case, Better says it operates under the current rules, but the company has not explained exactly how the collateral is legally protected if it or a financing partner runs into trouble.
For European crypto readers, this is especially relevant because it shows how far crypto is continuing to seep into traditional lending products. At the same time, the setup makes clear that holding assets on a crypto exchange or with a custodian is not the same as having them freely available, especially when that collateral is being put to work again.
