Borrowers can now use $250k in Bitcoin for a house down payment without margin calls, but one trap remains

Better Mortgage and Coinbase announced on Aug. 26 that Better's token-backed conforming mortgage had reached general availability. Better's product page says interested borrowers can start an application.

The structure does not use Bitcoin to secure the primary mortgage. Instead, a homebuyer takes two loans from Better: a standard first mortgage on the home designed to conform to Fannie Mae guidelines, and a separate loan that supplies the cash down payment. The second loan is secured by pledged Bitcoin and a second lien on the property.

Under Better's current product terms, Bitcoin carries a 40% advance rate, equal to a 250% collateral requirement. In the company's example, $250,000 of BTC supports a $100,000 down-payment loan. Better's program terms say that advance rates can change without notice, so those figures describe the published structure rather than a guaranteed offer for every applicant.

The Bitcoin is transferred to Better Mortgage's custodial account on Coinbase Prime. Better's terms prohibit the borrower from selling, transferring, re-pledging or otherwise encumbering it without prior written consent during the pledge period. The borrower keeps economic exposure to the Bitcoin, but gives up normal control and liquidity.

Coinbase provides the account-transfer and Prime infrastructure. It does not originate or service the loans; Better handles the application, underwriting, closing and ongoing servicing.

Payment default, not price, drives liquidation

Day-to-day Bitcoin price movements alone do not trigger a margin call, a demand for more collateral or forced selling under the current public terms. That is the product's main difference from a conventional crypto margin loan, where a rising loan-to-value ratio can prompt automatic liquidation.

The trigger is payment delinquency. Better says delinquency begins the day after a missed payment and gives the borrower 30 days to bring the account current. If the borrower remains delinquent for 60 days, Better says it may liquidate the pledged Bitcoin. The individual loan documents ultimately govern the borrower's obligations and Better's remedies.

That leaves the buyer with risks that are separate from Bitcoin's day-to-day price. A forced sale can eliminate future upside and may create a taxable event, according to Better's terms. The second lien also gives the down-payment lender another secured claim against the home.

The offer is not automatically available to every U.S. borrower. Applicants need a verified Coinbase account, must satisfy Better's underwriting and conforming-loan requirements, and must purchase in an eligible jurisdiction. Better's program terms specify a minimum 680 FICO score and say the product may be limited to select states, but they do not publish a state-by-state list.