Bitcoin Now Backs Home Loans Without Margin Calls

Homebuyers can now leverage Bitcoin for down payments on houses through a new offering from Better Mortgage, in partnership with Coinbase. The innovative product allows individuals to use their Bitcoin holdings as collateral for a second loan, which then provides the cash needed for a down payment on a primary mortgage. This structure aims to shield borrowers from the immediate liquidation risks often associated with traditional crypto-backed loans.

Unlike conventional margin loans where price drops can trigger automatic margin calls and forced selling, this new mortgage product's liquidation trigger is payment delinquency. Borrowers have a 60-day grace period after a missed payment before Better Mortgage may liquidate the pledged Bitcoin. This approach allows homeowners to retain exposure to potential Bitcoin price appreciation while still securing financing.

The Bitcoin collateral, held in a custodial account on Coinbase Prime, is pledged for the down payment loan. While borrowers maintain economic exposure, they relinquish direct control and liquidity of the crypto asset during the pledge period. Better Mortgage handles the loan origination and servicing, while Coinbase facilitates the custody and transfer of the digital assets. The program's terms, including advance rates, are subject to change, and specific loan documents will govern the ultimate borrower obligations.