Better and Coinbase have opened their bitcoin-backed mortgage to the general public, and Better told CoinDesk that pre-applications have already reached $360 million in requested loan volume since the rollout, above the $260 million it projected from an earlier waitlist. The product lets homebuyers pledge bitcoin to fund a cash down payment without selling their holdings, but it comes with a notable condition: Better can rehypothecate the pledged bitcoin, and borrowers cannot recover their crypto until the primary mortgage is fully repaid or refinanced, according to CoinDesk’s September 6 report.
A Two-Loan Structure Backed by Bitcoin
At closing a borrower receives two loans. The first is a standard Fannie Mae-conforming mortgage secured by the home, while the second funds the cash down payment and is secured by the borrower’s bitcoin plus a second lien on the same property. The bitcoin-backed loan starts at a 250% collateral ratio, meaning a buyer must pledge $2.50 in BTC for every $1 borrowed for the down payment. In Better’s example, a buyer purchasing a $500,000 home could pledge $250,000 of bitcoin to fund a $100,000 down payment. Both loans are originated by Better and collected through one combined monthly payment.
Rehypothecation and Coinbase Custody
At closing, the bitcoin moves from the borrower’s Coinbase account into Better’s custody account on Coinbase Prime. Better disclosed that it may rehypothecate the pledged bitcoin as long as it keeps an equivalent amount available to return. “Better may rehypothecate the pledged bitcoin, provided it keeps equivalent Bitcoin on hand to return the collateral at loan payoff,” the company said. Coinbase acts only as the custodian and technology provider and has no role in extending credit or deciding when collateral is liquidated. Rehypothecation means the borrower is promised an equivalent quantity of bitcoin at payoff rather than the same coins, exposing them to Better’s ability to return that collateral.
What the Product Does Not Do
Bitcoin does not help a borrower qualify for the first mortgage. Applicants must still satisfy Fannie Mae’s ordinary income, credit score and debt-to-income requirements independently of their crypto holdings. “Nothing in the product converts crypto holdings into qualifying income or waives DTI or credit thresholds,” Better said in written responses. “The Bitcoin loan only solves the cash-for-down-payment problem.” The launch extends a run of crypto-backed lending products, following APX Lending’s five-year bitcoin- and ether-backed line of credit and Arch Lending’s acceptance of tokenized gold as loan collateral.
