Millions of Bitcoin Holders Can Now Tap Into Real Estate

Bitcoin can now be used to finance the purchase of a home in the United States without going through the sale process. Better Mortgage and Coinbase have just widely opened their real estate loan backed by digital assets. Bitcoin serves as collateral to finance the initial down payment. The owner retains exposure to bitcoin throughout the loan duration.

Bitcoin enters American real estate credit

The project had started a few months earlier. The United States was already working to integrate cryptos into the appraisal of real estate loans. Coinbase and Better are now moving to the commercial phase. The product is available for eligible Better customers. It allows using bitcoins as collateral to cover the down payment required when purchasing a home.

No need to sell the bitcoins. A buyer who has 250,000 dollars in bitcoin can, for example, obtain up to 100,000 dollars 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 Better custody account on Coinbase Prime. They remain there until the loan is repaid or refinanced. Once the credit is repaid, the bitcoins are returned according to the contract conditions.

Two loans behind the same house

The setup is not simply handing bitcoins to a bank in exchange for a mortgage. It combines two loans. The first is a classic conforming mortgage loan following Fannie Mae rules. The second finances the down payment and uses Bitcoin as collateral, also with a secondary security interest on the home.

Both loans share the same interest rate and amortization period. The borrower then makes a single monthly payment. Better grants the credit and monitors it. Coinbase mainly provides the infrastructure to transfer and hold the bitcoins used as collateral.

The model brings Bitcoin a bit closer to traditional credit. JPMorgan had already started accepting Bitcoin and Ethereum as collateral for some institutional loans.

This time, the product targets individuals who want to buy their home. Coinbase One also adds a discount. Eligible members can receive credit equivalent to 1% of the loan amount on their closing costs, capped at 10,000 dollars.

Over 260 million dollars already in line

Better and Coinbase had opened a waiting list before the product became widespread. The initial numbers were quite fast. 76% of registered people were already using Coinbase One. 60% planned to buy a property within six months.

The anticipated loan volume exceeded 260 million dollars. Better also speaks of a much larger market. About 52 million Americans hold digital assets. Not all obviously want to buy a house tomorrow.

Not all will be eligible either. Bitcoin used as collateral still faces another well-known issue: its price can drop significantly. The borrower retains exposure to BTC instead of selling at the time of the home purchase.

So they also take the risk. The bitcoin-backed loan is growing despite everything. A recent report estimated the market for bitcoin-backed loans could one day reach 1,000 billion dollars. Coinbase and Better now give it a very concrete use. A house. And Bitcoin as collateral rather than a check for the down payment.

Lydie M.

Enseignante et ingénieure IT, Lydie découvre le Bitcoin en 2022 et plonge dans l’univers des cryptomonnaies. Elle vulgarise des sujets complexes, décrypte les enjeux du Web3 et défend une vision d’un futur numérique ouvert, inclusif et décentralisé.

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The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.