Debut of Crypto-Backed Mortgages Offers Younger Buyers a Pathway to Home Ownership

An emerging mortgage product backed by cryptocurrency offers a new path to home ownership for many Americans, especially millennials who have the highest cryptocurrency ownership rates of any generation.Government-controlled Fannie Mae will now accept crypto-backed mortgages for home purchases under a new partnership between Coinbase and mortgage company Better Home and Finance. This will enable the loans to carry significantly lower interest rates than those traditionally associated with token-backed loans.The program will make it easier for Americans with wealth tied to cryptocurrency but limited available cash to purchase a home. Token-backed mortgages will be originated and serviced by Better — an AI-based mortgage company — and work like traditional conforming mortgages.Customers will be able to pledge Bitcoin or the stablecoin USDC as collateral for a loan to cover the cash down payment on a mortgage. The home buyers will in effect have two loans — one for the down payment and one for the balance owed on the home. However they will retain ownership of the cryptocurrency, enjoying any future increase in its value while avoiding the capital gains tax that would come with a sale. Coinbase says if the digital currency drops in value due to market swings, it won’t call the loan due as long as the borrower continues to make their payments on time.“Better was founded to make homeownership more accessible for all Americans, and this partnership with Coinbase introduces a new pathway to realizing the American Dream for the 52 million Americans who own digital assets,” the founder and chief executive officer of Better, Vishal Garg, said in a release. “Together, we are taking a major step towards truly democratizing homeownership for hardworking Americans.”Coinbase reports that 45 percent of younger investors say they own crypto, compared with 18 percent of older investors. The company says as younger generations continue to build wealth through digital assets, traditional pathways to homeownership are no longer aligned with how modern wealth is created.A majority of token holders are 45 years old or younger and 26 percent of them earn less than $75,000 a year.Redfin reports that 12.7 percent of Gen Z and millennial homebuyers have already sold tokenized assets to fund a down payment on a home.“The ability to transform digital wealth into housing access is an exciting milestone in our mission to increase economic freedom,” the head of consumer and business products at Coinbase, Max Branzburg, said in a release. “Token-backed mortgages are a major first step to unlocking homeownership for the younger generations that have struggled with barriers to saving for a traditional down payment.”Traditional banks are also entering the crypto-backed mortgage market.JPMorgan Chase, the biggest bank in America, allows some customers to use Bitcoin and Ethereum as loan collateral. Wells Fargo has started issuing credit against Bitcoin as collateral.Luxury real estate broker Tony Giordano has predicted a merging of crypto with the mortgage market. He says it will save time and money in the process.“I don’t see how the entire real estate industry will not be on the blockchain within 10 years,” Mr. Giordano told CNBC. “It’s the most secure platform and technology to do it. So, 10 years, I’d be surprised if it takes 10 years.”

Debut of Crypto-Backed Mortgages Offers Younger Buyers a Pathway to Home Ownership

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