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In mid‑September, the digital mortgage lender Better Mortgage, together with the crypto exchange Coinbase, launched a new product that enables homebuyers to use Bitcoin as collateral for the down payment. The main feature is that the coins are not just frozen for the duration of the loan but can be used by the bank in further transactions, i.e., repurposed. This distinguishes the scheme from traditional collateral and raises questions about protecting customers’ rights.

The initial data show strong interest: Better reported that preliminary applications exceeded $360 million, compared to the initial target of $260 million. This confirms the demand for hybrid solutions among crypto‑active buyers.

The transaction consists of two loans. The first is a standard mortgage under Fannie Mae standards, secured by the property, where Bitcoin does not affect approval. The second covers the down payment and is secured by the client’s cryptocurrency plus an additional pledge of the same property. The coverage ratio is 250%: for every dollar of the second loan, you need 2.5 dollars in BTC. For example, for a house worth 500,000 and a down payment of 100,000, you will need to lock up 250,000 in bitcoins.

The payment for both loans is made in a single amount. However, after the transaction, the Bitcoin is transferred from Coinbase to the Better wallet in Coinbase Prime, and from that moment on, a re‑pledging arrangement is in effect. Better can use the coins in its operations, promising to return an equivalent amount, but not the same ones. In fact, the pledge turns into a bank’s debt to the client.

Coinbase acts only as a custodian and is not responsible for Better’s actions. All risks — the operator’s bankruptcy, a drop in value — fall on the borrower. Better claims to comply with the law, but does not disclose how the coins are identified or who becomes the owner upon re‑pledging.

Early repayment of the second loan does not return the Bitcoin — it remains pledged until the mortgage is fully repaid or refinanced. When selling a house, the standard loan is paid off first, then the loan secured by BTC, and only the remaining balance and the coins are returned to the owner. Thus, BTC may be locked for the entire period of 15–20 years.

The program does not require additional collateral in the event of a price drop, and liquidation does not occur automatically. It is only possible in the event of a missed combined payment: Better may sell part of the BTC after 60 days of notification, and foreclosure on the property may occur after 180 days, in accordance with Fannie Mae rules.

So far, only Bitcoin is accepted, although USDC was previously mentioned. Coinbase One subscribers can receive an additional loan of up to $10,000 to close the transaction.