Bitcoin Mortgages Let Buyers Keep Their Crypto

Pledging Bitcoin instead of paying a cash down payment lets buyers keep their coins, but it replaces savings with a second loan and locks the collateral for years.

Key Takeaways

The Financial Times reported on October 22 on a buyer who took a $130,000 Bitcoin-backed loan alongside a conventional mortgage, pledging $325,000 of Bitcoin, 2.5 times the loan.

Better’s pitch leaves out the second loan

Better and Coinbase announced the product in March and made it generally available in August. Better later told CoinDesk that pre-applications had reached $360 million in requested loan volume, above the $260 million it had projected from its waitlist.

Borrowers receive two loans at closing. The first is a conforming Fannie Mae mortgage on the home. The second funds the cash down payment and is secured by the pledged Bitcoin and a second lien on the property. Better originates both, in 15- or 30-year fixed terms, and the pledged Bitcoin does not help a borrower qualify for the main mortgage.

Better’s product page frames the choice as selling against pledging. Its default example produces an “Est. net benefit” of $46,000 upfront, mostly the cash a buyer no longer has to put down. The comparison stops at closing day.

What it costs to keep $130,000 in Bitcoin

The FT borrower pledged $325,000 of Bitcoin, but that is not the amount of exposure the loan preserved. His alternative was to sell roughly $130,000 worth, plus any tax, and keep the rest. The second loan pays for continued exposure to that $130,000 slice, while the whole $325,000 stays locked.

At Freddie Mac’s latest weekly average of 7.40%, the borrower is paying about $900 a month to hold on to $130,000 of Bitcoin. The pledge works out only if that slice gains more than the interest and fees, after tax. The payments are fixed; the gains are not.

Day 60 for the Bitcoin, day 180 for the house

Better says a falling Bitcoin price never triggers a top-up or a forced sale. Its FAQ contrasts this with margin loans, where collateral can be liquidated automatically at a set loan-to-value ratio even when payments are current.

The protection covers price, not income. A household hit by falling crypto prices and a lost job escapes a margin call, but still has to make the payment that keeps the Bitcoin from being sold at day 60. Because the down-payment loan also holds a second lien, the house secures it as well.

Locked until the mortgage is gone, and possibly reused

Better’s FAQ gives three different answers on when the Bitcoin comes back. One says it is returned once the down-payment loan is repaid. Another says only after the main mortgage is fully repaid or refinanced. A third says it is released when the home is sold and the down-payment loan is paid off. Better told CoinDesk that the collateral stays locked until the conventional mortgage is repaid or refinanced, which on a 30-year loan can mean decades.

The coins may not sit untouched in the meantime. Better told CoinDesk it may rehypothecate pledged Bitcoin, using it elsewhere, as long as it keeps an equivalent amount available to return at payoff. The borrower is owed the same quantity of Bitcoin, not necessarily the same coins, and depends on Better being able to deliver it. Coinbase acts only as custodian and technology provider, with no role in extending credit or deciding on liquidation, the companies told CoinDesk.

The tax case, and the test that matters

Avoiding a sale can avoid a tax bill. The IRS treats digital assets as property, so selling can realise a capital gain. Better’s example applies a flat 20%, but federal long-term rates are 0%, 15% or 20% depending on income, short-term gains are taxed as ordinary income, and the result also depends on the holder’s cost basis. Better itself tells borrowers to consult a tax adviser. For more on how the product works, see our guide to using Bitcoin as a down payment.

The deciding question is cash flow. The pledged Bitcoin cannot be used to make payments while it is locked, so the borrower’s income has to cover both loans for as long as they run.

This article is for informational purposes only and does not constitute financial, legal or tax advice. Loan terms and eligibility vary; calculations are illustrative.

Author

Alex is Editor-in-Chief of Coindoo and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets – crypto first, then everything else.

It started in 2016 with Bitcoin. Like most people at the time, he didn’t fully understand it – so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can’t properly understand one without the other.

What drives him is straightforward: he wants to know why something is happening, not just that it’s happening. Most market coverage stops at the headline – price up, price down, here’s a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn?

He holds a degree in Tourism from New Bulgarian University – not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That’s probably why he hasn’t stopped.

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