Mortgages for Those Using Bitcoin as a Down Payment: Return of Identical Bitcoins Not Guaranteed

Better and Coinbase’s new mortgage product allows for the reuse of Bitcoin provided as a down payment while preventing the collateral from being reclaimed until the mortgage ends.

Better’s Coinbase-backed product allows homebuyers to use their Bitcoin for down payment financing. However, according to company statements reported by CoinDesk, the Bitcoin is transferred from the borrower’s Coinbase account to Better’s custody account on Coinbase Prime at closing, and there is no guarantee that the same coins will be kept untouched.

Under the product, the borrower takes out two loans simultaneously. The first is a standard mortgage secured by the home, while the second covers the down payment and is secured by both the Bitcoin and a second lien on the property. Bitcoin does not help meet the income, credit score, or debt-to-income ratio requirements for the primary mortgage.

Bitcoin Collateral Can Be Reused

Better states that it may use the Bitcoin received as collateral in other transactions, but will keep an equivalent amount of Bitcoin ready to be returned once the loan concludes. This structure does not mean the borrower will receive the exact same coins back; it creates a return commitment contingent on the company’s ability to provide the same amount.

A 250% collateralization ratio is applied at the start of the loan. Accordingly, $2.50 worth of Bitcoin is required for every $1 of the down payment loan. The Bitcoin is not released until the mortgage is fully paid off or refinanced. This period can extend up to 15 or 30 years.

A drop in Bitcoin’s price alone does not trigger a margin call. However, if the combined loan payment is missed, Better can liquidate the Bitcoin 60 days after notice. The company announced that pre-application demand reached $360 million after the product’s general launch. This figure represents the requested amount, not the realized loan volume.