America’s largest crypto exchange, Coinbase, and mortgage giant Better Mortgage have officially partnered to expand Bitcoin and USDC-backed conforming mortgages to the 120 million home buyers and 50 million Bitcoin users all over the US.
Coinbase partners with Better Mortgage for Bitcoin-backed mortgages
According to a joint announcement made today, the product lets homebuyers pledge their Bitcoin or USDC for home loans without liquidating them or triggering capital gains taxes.
Backed by Fannie Mae, the product offers the standard mortgage loan in addition to a down payment loan. The latter is backed by the client’s cryptocurrency at 250% of the loan amount for Bitcoin and 125% for USDC. Both loans share the same interest rate and payment schedule, conveniently enabling a combined monthly payment.
Once approved, Coinbase Prime powers a transfer of the client’s crypto assets to a Better Mortgage custodial escrow account. This means that during the loan payment period, users cannot withdraw or trade these digital assets. They, however, retain 100% market upside gains during that period.
Volatility, terms of liquidation and perks
Unlike standard margin loans, price fluctuations will not trigger margin calls or alter the mortgage terms. Pledged cryptocurrencies are only subject to liquidations should the client defer payment for 60 days.
To compensate for this absence of margin calls, the loans generally feature interest rates 0.5% to 1.5% higher than standard non-crypto 30-year fixed mortgages.
Notably, the program is exclusively available to verified Coinbase One members. This offers the advantage of instant funds source verification as compared to the immense paperwork required by banks. This cohort is also granted a 1% lender rebate (capped at $10,000) directly applied to closing costs.
Development history
While announced today, the crypto-backed mortgage program was made available to the 1 million Coinbase One paying subscribers on August 12.
Events leading up to this began with the March approval for Fannie Mae to accept cryptocurrency as loan collateral. That was followed by a June test phase, which attracted $260 million in projected loan demand. The latest product covers home loans, HELOCs (Home Equity Line of Credit), and refinances.
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