Coinbase has partnered with direct mortgage lender Better to enable its customers to use crypto for the mortgage down payment. Depending on the house purchase, the mortgage is a typical 15- or 30-year fixed Fannie Mae eligible loan, but the key advantage is that digital asset investors don’t need to liquidate their crypto holdings to meet the downpayment.
The deal is also packaged conveniently. Two loans share the same interest rate and amortization term, producing a single combined monthly payment. Naturally the lender wants to cover their downside risk, so requires 250% of the downpayment for bitcoin pledges and 125% for USDC. Additionally, Better is offering rebates of up to $10,000 on closing costs for Coinbase One members.
It’s not the first deal that leveraged crypto for mortgages. We previously analyzed a Figure announcement four years ago, and last year the Director of the US Federal Housing Finance Agency (FHFA) ordered Fannie Mae and Freddie Mac to explore taking crypto into account as collateral.
We can see why someone might want to hold onto their BTC, particularly to avoid crystallizing capital gains, but we’re puzzled as to why a borrower wouldn’t just liquidate the USDC for the downpayment. As we show below, for a $100,000 downpayment, pledging $125,000 USDC would cost the mortgagee an extra $2,600 even taking account of Coinbase rewards. For Bitcoin there are also more cost effective avenues, though those come with their own inconvenience and risk. The USDC case is harder to justify.
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