Better and Coinbase’s bitcoin-backed mortgages can reuse borrowers’ collateral
Better and Coinbase have launched a mortgage product that allows borrowers to use bitcoin as collateral for their down payment. The companies confirmed that they may rehypothecate the pledged bitcoin, provided they maintain sufficient reserves to return the collateral upon loan payoff.
Why it matters
This product introduces a new financial instrument that leverages crypto assets for traditional real estate financing, raising questions about risk management and rehypothecation practices.
The companies made the product generally available last week. Better told CoinDesk that pre-applications have, since the launch to the general public, reached $360 million in requested loan volume, up from the $260 million projected by borrowers who joined its earlier waitlist.
A borrower receives two loans at closing. 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, as well as a second lien on the same property.
The bitcoin-backed loans begin at a 250% collateral ratio, meaning a buyer must pledge $2.50 of BTC for each $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.
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