Coinbase Opens Real Estate to Millions of Bitcoin Holders

Bitcoin can now be used to finance the purchase of a home in the United States without having to sell it first. Better Mortgage and Coinbase have just launched their mortgage loan backed by digital assets on a large scale. Bitcoin serves as collateral to finance the down payment. The owner retains their exposure to Bitcoin for the entire duration of the loan.

In Brief

• Better and Coinbase are rolling out their Bitcoin-backed mortgage loan.
• BTC can replace cash down payments without needing to be sold.
• The waiting list already represented over $260 million in potential loans.

Bitcoin Enters American Mortgage Credit

The project had begun a few months earlier. The United States was already working to incorporate cryptocurrencies into mortgage evaluations. Coinbase and Better are now moving to the commercial stage. The product is available to eligible Better clients. It allows the use of bitcoins as collateral to cover the required down payment when purchasing a home.

There is no need to sell bitcoins. A buyer with $250,000 in bitcoin can, for example, obtain up to $100,000 for their down payment. Better requires crypto collateral equivalent to at least 250% of the loan dedicated to this down payment.

The bitcoins are then transferred to a custody account at Better on Coinbase Prime. They remain there until the loan is repaid or refinanced. Once the loan is repaid, the bitcoins are returned according to the terms of the contract.

Two Loans Behind the Same House

The arrangement is not simply about handing over bitcoins to a bank in exchange for a mortgage loan. It combines two loans. The first corresponds to a traditional mortgage loan compliant with Fannie Mae's rules. The second finances the down payment and uses Bitcoin as collateral, with a second lien on the property as well.

Both loans share the same interest rate and amortization period. The borrower then makes a single monthly payment. Better grants the loan and ensures its follow-up. Coinbase primarily provides the infrastructure to transfer and hold the bitcoins used as collateral.

The model brings Bitcoin even closer to traditional credit. JPMorgan had already begun accepting Bitcoin and Ethereum as collateral for certain institutional loans.

This time, the product targets individuals looking to buy their homes. Coinbase One also adds a discount. Eligible members can receive a credit equivalent to 1% of the loan amount towards their closing costs, with a cap of $10,000.

Over $260 Million Already in Line

Better and Coinbase had opened a waiting list before the product was rolled out. The initial figures came in quite quickly. 76% of those registered were already using Coinbase One. 60% planned to buy a home within six months.

The volume of loans considered exceeded $260 million. Better also speaks of a much larger market. About 52 million Americans are estimated to hold digital assets. Not everyone obviously wants to buy a house tomorrow.

Not everyone will be eligible either. The bitcoin used as collateral remains subject to another well-known issue: its price can drop significantly. The borrower retains their exposure to BTC instead of selling at the time of purchasing the home.

They also keep the risk. Bitcoin-backed credit is nonetheless gaining traction. A recently mentioned report estimated that the market for Bitcoin-backed loans could one day reach $1 trillion. Coinbase and Better are now giving it a very concrete use. A house. And Bitcoin as collateral instead of a check for the down payment.