The first bitcoin-backed traditional mortgage in America was just issued

The first-ever traditional mortgage backed by bitcoin and accepted by Fannie Mae was just issued to a couple in Michigan, and it could represent a look into the future of crypto-backed financial products. Crypto’s intersection with traditional finance is only deepening, but bitcoin’s integration with the $13 trillion mortgage market represents a significant step for the adoption of tokenized finance products. 

Here’s everything you need to know.

How do crypto-backed mortgages work?

Crypto-backed mortgages are loans backed by a borrower’s crypto assets rather than traditional requirements, like cash, property, or credit scores. The first-ever Fannie Mae-accepted, BTC-backed loan was issued in collaboration with Coinbase and the mortgage lender Better, who are allowing users to take out mortgage loans backed by their BTC or USDC holdings.

One potential upside of crypto-backed mortgages is that they allow borrowers to receive a loan without having to liquidate their holdings or incur taxes.

Technically, there are two separate loans closed simultaneously, that are then combined into a single monthly payment. One is a standard Fannie Mae mortgage, and the second is a crypto-backed loan that funds the down payment. 

A borrower buying a $500,000 home, for example, could obtain a $400,000 Fannie Mae mortgage and use a separate $100,000 loan for the down payment. To secure that down payment, they’d need $250,000 worth of bitcoin as collateral, or $125,000 worth of USDC, since the collateral pledge ratio for bitcoin-backed loans is roughly 2.5-to-1 and 1.25-to-1 for USDC. 

Who received the first crypto-backed mortgage?

The first Fannie Mae-backed BTC mortgage was issued to Joe and Amy, a married couple in their early 30s living in Ann Arbor, Michigan. Joe said that he was searching for a way to use his bitcoin to buy a home, but didn’t want to have to sell his holdings for the down payment. 

“Buying our first home has always been the goal, but I wasn’t willing to give up a decade of investing to get there,” said Joe. “With this mortgage, I didn’t have to choose.” 

How big of a market could there be for crypto-backed mortgages?

Crypto-backed mortgages are still a nascent market — Better and Coinbase’s program isn’t expected to be fully rolled out until later this summer. But the demand is clear. Based on waitlist data, Better estimates there is around $250 million in projected loan volume awaiting approval. Of the waitlist, 76% of users are Coinbase customers, 37% hold $500,000 or more in crypto, and 63% expect to buy a home in the next six months. 

Crypto mortgages that aren’t backed by Fannie Mae have also been growing in popularity. Milo, a crypto-backed lender, has already doled out more than $100 million in mortgage loans, and has a track record of zero margin calls. Ledn, another crypto lender, recently estimated that the bitcoin-backed loan industry overall could grow from roughly $3 billion today to $1 trillion within a decade.