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What Is a Crypto-Backed Mortgage?
Key Takeaways
A crypto-backed mortgage allows you to use cryptocurrency such as Bitcoin as collateral to help secure a home loan, either by counting it toward your financial profile or by borrowing against it for a down payment.
Most crypto mortgage structures today involve a two-step process: borrowing fiat currency against your crypto through a lending platform, then using those funds as part of a traditional mortgage application.
Key risks include cryptocurrency price volatility, which can trigger margin calls or forced liquidation of your collateral if market values drop sharply.
One potential advantage is tax efficiency, borrowing against crypto instead of selling it generally does not trigger capital gains tax in many jurisdictions, though individual circumstances vary.
Introduction
A crypto-backed mortgage is a home financing arrangement where digital assets are used to strengthen a mortgage application or to fund the purchase itself. These structures have gained attention as blockchain technology becomes more integrated into traditional financial services. In this article, let’s look at how they work, the different types, and key risks that lenders should consider.
How Do Crypto-Backed Mortgages Work?
When people talk about crypto-backed mortgages, they are generally referring to one of two distinct approaches. The first is using cryptocurrency holdings to help qualify for a conventional mortgage, the lender considers your crypto as part of your overall financial picture, but the loan itself is still a standard mortgage paid in dollars. The second approach involves taking out a separate loan against your crypto, then using that borrowed money to fund your home purchase.
In both cases, the core concept is the same: your crypto acts as collateral. Instead of selling your digital assets, which may trigger capital gains tax and mean losing potential future upside, you pledge them as security. This allows you to access the value of your crypto without giving up ownership, at least as long as you meet the loan terms.
Types of Crypto-Backed Mortgage Structures
Currently, the crypto-backed mortgage space can be divided into three broad categories, each with different requirements and risk profiles. Understanding these distinctions is important because they affect everything from how much you can borrow to what happens if crypto lending markets shift dramatically.
Using crypto to qualify for a traditional mortgage
Some non-traditional (non-qualified mortgage or non-QM) mortgage lenders have begun accepting cryptocurrency as part of a borrower's financial profile. For example, platforms like Newrez's "Smart Series" may count crypto holdings toward asset verification, reserves requirements, and in some cases income qualification. Notably, stablecoins such as USDC may be valued at up to 90% of their dollar worth for these purposes, while more volatile assets like Bitcoin or Ether might only count at 50% of their current market value.
Under this model, your crypto helps you qualify for a mortgage, but the actual closing still requires US dollars. You will typically need to convert some crypto to fiat currency, move the funds into a traditional bank account, and document every step of the process for the underwriter. The mortgage itself is a conventional loan secured by the property, your crypto is used only for qualification purposes, not as direct collateral for the mortgage.
Crypto-collateralized loans for home purchases
A more common structure involves borrowing against your crypto through a dedicated lending platform. Lenders such as Ledn (Bitcoin-focused) and Unchained (multisig custody) offer loans where you pledge crypto as collateral and receive fiat currency or stablecoins in return. These funds can then be used toward a down payment or, for larger amounts, to purchase a property outright. This approach is often used alongside Ethereum and Bitcoin holdings through regulated platforms that increasingly operate with segregated client assets and strict no-rehypothecation policies.
The mechanics are similar to any secured loan. You transfer your crypto to a custody arrangement (typically a regulated third-party custodian or a multisignature wallet). The lender then provides funds at a loan-to-value (LTV) ratio that typically ranges from 40% to 50% for Bitcoin, meaning $200,000 in BTC could support a loan of up to approximately $80,000 to $100,000. You make monthly payments in fiat currency, and once the loan is fully repaid, your crypto is returned. In the decentralized finance (DeFi) space, smart contracts automate similar lending arrangements without intermediaries, though these carry additional protocol-level risks.
One significant advantage of this structure is its tax treatment. In many jurisdictions, borrowing against an asset does not trigger a taxable event the way selling does. This means you may be able to access your crypto's value without realizing capital gains, an outcome that is especially relevant for long-term holders with significant unrealized appreciation. However, tax rules vary by country, and professional advice is always recommended for specific situations.
Direct crypto-backed mortgage products
A third, less common category involves mortgages where both the property and the crypto serve as combined collateral. These products are still in the early stages, typically limited to specific jurisdictions and aimed at high-net-worth borrowers. The structure generally involves a conventional first mortgage on the home alongside a second-lien loan secured by pledged crypto, with the crypto held and administered by a regulated partner. Users need a compatible cryptocurrency wallet and must complete identity verification processes.
These direct products are not yet widely available through mainstream mortgage lenders, and the terms, eligibility requirements, and available regions can change as the regulatory landscape develops. They represent a growing area of innovation at the intersection of traditional real estate finance and digital asset markets.
Key Risks to Consider
Crypto-backed mortgages offer potential benefits but also carry significant risks that any prospective borrower should understand before proceeding.
Price volatility and liquidation risk
The most important risk to understand is volatility. Cryptocurrency prices can fluctuate dramatically over short periods, Bitcoin has experienced drawdowns of 50% or more in past cycles. If the value of your pledged crypto drops below a certain threshold relative to your loan amount, you may face a margin call requiring you to post additional collateral or repay part of the loan. If you cannot meet the margin call, the lender may liquidate some or all of your crypto at whatever the current market price happens to be, potentially locking in significant losses.
Interest rate and cost differences
Crypto-backed loans typically carry higher interest rates than conventional prime mortgages. As of 2025–2026, rates for crypto-collateralized loans may range from mid-single digits to mid-teens in annual percentage rate (APR), plus fees for origination, custody, and legal structuring. Over the life of a long-term obligation, these additional costs can add up meaningfully compared to a standard mortgage.
Regulatory and custody risk
The regulatory framework for crypto-backed lending continues to evolve. Changes in how digital assets are classified, how custody must be managed, or how lending platforms must operate could affect the terms of existing loans or limit the availability of new ones. Additionally, while many lending platforms have strengthened their custody practices since the 2022 credit cycle, with features like regulated custodians, no rehypothecation, and segregated client accounts, counterparty risk remains a factor. Borrowers should understand how their collateral is held and what protections are in place.
Effective risk management practices, such as maintaining conservative LTV ratios, holding liquid reserves for margin requirements, and stress-testing your position against historical drawdowns, can help mitigate some of these risks, though they cannot eliminate them entirely.
FAQ
Can I use Bitcoin to buy a house without selling it?
Yes, it’s possible in principle. The most common approach is to borrow against your Bitcoin through a crypto lending platform, receive the loan proceeds in fiat currency or stablecoins, and use those funds for your home purchase. This way, you retain ownership of your Bitcoin as long as you make loan payments and avoid a liquidation event. However, this requires sufficient Bitcoin to support a large enough loan at conservative LTV ratios, and you will still need to qualify for any additional mortgage on the property.
What is a typical loan-to-value ratio for crypto-backed loans?
Conservative institutional lenders typically offer LTV ratios around 40% to 50% for Bitcoin. This means $100,000 in BTC might support a loan of roughly $40,000 to $50,000. DeFi platforms may allow higher LTVs, up to 80% or more, but these carry substantially greater liquidation risk because a smaller price drop is enough to trigger an automatic sell-off of your collateral.
Do I still need a regular mortgage if I use crypto as collateral?
In most cases, yes. Unless your crypto-backed loan is large enough to purchase a property outright, you will likely combine it with a conventional mortgage. The crypto-backed loan typically covers the down payment or a portion of the purchase price, while a standard mortgage from a lender covers the remainder. Both obligations will need to be managed simultaneously.
Is a crypto-backed mortgage taxable?
Borrowing against crypto generally does not trigger a taxable event in many jurisdictions, because you are not selling or disposing of the asset. This can be a significant advantage compared to selling crypto directly and realizing capital gains. However, tax rules vary by country and individual circumstances, and interest on crypto-backed loans may or may not be deductible depending on how the funds are used and local tax law. Professional tax advice is recommended.
What happens if the price of my crypto drops after I take out the loan?
If your crypto collateral drops below a certain threshold, the margin call LTV, your lender will typically require you to post additional collateral or repay part of the loan. If you cannot do so, the lender may sell some or all of your crypto to bring the loan back within acceptable risk parameters. This is known as forced liquidation and can result in the loss of your crypto at potentially unfavorable prices, while you may still be obligated to repay any shortfall on the loan.
Closing Thoughts
Crypto-backed mortgages represent an emerging bridge between traditional real estate finance and the growing digital asset economy. While the underlying mechanics, using an asset as collateral to secure a loan, are well established, the specific application to cryptocurrency is still maturing.
For the right borrower in the right circumstances, particularly those with significant crypto holdings who wish to preserve their exposure while accessing liquidity, these structures can be worth exploring. However, the combination of crypto volatility with the long-term nature of mortgage debt creates risk dynamics that are different from either traditional mortgages or standalone crypto lending.
Further Reading
What Is Rehypothecation Risk in Crypto Lending?
A Beginner's Guide to Binance Loans
What Is Margin Trading?
Forced Liquidation
Custody
Disclaimer: This content is presented to you on an "as is" basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal, or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third-party contributor, please note that those views expressed belong to the third-party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.
A crypto-backed mortgage allows you to use cryptocurrency such as Bitcoin as collateral to help secure a home loan, either by counting it toward your financial profile or by borrowing against it for a down payment.
Most crypto mortgage structures today involve a two-step process: borrowing fiat currency against your crypto through a lending platform, then using those funds as part of a traditional mortgage application.
Key risks include cryptocurrency price volatility, which can trigger margin calls or forced liquidation of your collateral if market values drop sharply.
One potential advantage is tax efficiency, borrowing against crypto instead of selling it generally does not trigger capital gains tax in many jurisdictions, though individual circumstances vary.
Introduction
A crypto-backed mortgage is a home financing arrangement where digital assets are used to strengthen a mortgage application or to fund the purchase itself. These structures have gained attention as blockchain technology becomes more integrated into traditional financial services. In this article, let’s look at how they work, the different types, and key risks that lenders should consider.
How Do Crypto-Backed Mortgages Work?
When people talk about crypto-backed mortgages, they are generally referring to one of two distinct approaches. The first is using cryptocurrency holdings to help qualify for a conventional mortgage, the lender considers your crypto as part of your overall financial picture, but the loan itself is still a standard mortgage paid in dollars. The second approach involves taking out a separate loan against your crypto, then using that borrowed money to fund your home purchase.
In both cases, the core concept is the same: your crypto acts as collateral. Instead of selling your digital assets, which may trigger capital gains tax and mean losing potential future upside, you pledge them as security. This allows you to access the value of your crypto without giving up ownership, at least as long as you meet the loan terms.
Types of Crypto-Backed Mortgage Structures
Currently, the crypto-backed mortgage space can be divided into three broad categories, each with different requirements and risk profiles. Understanding these distinctions is important because they affect everything from how much you can borrow to what happens if crypto lending markets shift dramatically.
Using crypto to qualify for a traditional mortgage
Some non-traditional (non-qualified mortgage or non-QM) mortgage lenders have begun accepting cryptocurrency as part of a borrower's financial profile. For example, platforms like Newrez's "Smart Series" may count crypto holdings toward asset verification, reserves requirements, and in some cases income qualification. Notably, stablecoins such as USDC may be valued at up to 90% of their dollar worth for these purposes, while more volatile assets like Bitcoin or Ether might only count at 50% of their current market value.
Under this model, your crypto helps you qualify for a mortgage, but the actual closing still requires US dollars. You will typically need to convert some crypto to fiat currency, move the funds into a traditional bank account, and document every step of the process for the underwriter. The mortgage itself is a conventional loan secured by the property, your crypto is used only for qualification purposes, not as direct collateral for the mortgage.
Crypto-collateralized loans for home purchases
A more common structure involves borrowing against your crypto through a dedicated lending platform. Lenders such as Ledn (Bitcoin-focused) and Unchained (multisig custody) offer loans where you pledge crypto as collateral and receive fiat currency or stablecoins in return. These funds can then be used toward a down payment or, for larger amounts, to purchase a property outright. This approach is often used alongside Ethereum and Bitcoin holdings through regulated platforms that increasingly operate with segregated client assets and strict no-rehypothecation policies.
The mechanics are similar to any secured loan. You transfer your crypto to a custody arrangement (typically a regulated third-party custodian or a multisignature wallet). The lender then provides funds at a loan-to-value (LTV) ratio that typically ranges from 40% to 50% for Bitcoin, meaning $200,000 in BTC could support a loan of up to approximately $80,000 to $100,000. You make monthly payments in fiat currency, and once the loan is fully repaid, your crypto is returned. In the decentralized finance (DeFi) space, smart contracts automate similar lending arrangements without intermediaries, though these carry additional protocol-level risks.
One significant advantage of this structure is its tax treatment. In many jurisdictions, borrowing against an asset does not trigger a taxable event the way selling does. This means you may be able to access your crypto's value without realizing capital gains, an outcome that is especially relevant for long-term holders with significant unrealized appreciation. However, tax rules vary by country, and professional advice is always recommended for specific situations.
Direct crypto-backed mortgage products
A third, less common category involves mortgages where both the property and the crypto serve as combined collateral. These products are still in the early stages, typically limited to specific jurisdictions and aimed at high-net-worth borrowers. The structure generally involves a conventional first mortgage on the home alongside a second-lien loan secured by pledged crypto, with the crypto held and administered by a regulated partner. Users need a compatible cryptocurrency wallet and must complete identity verification processes.
These direct products are not yet widely available through mainstream mortgage lenders, and the terms, eligibility requirements, and available regions can change as the regulatory landscape develops. They represent a growing area of innovation at the intersection of traditional real estate finance and digital asset markets.
Key Risks to Consider
Crypto-backed mortgages offer potential benefits but also carry significant risks that any prospective borrower should understand before proceeding.
Price volatility and liquidation risk
The most important risk to understand is volatility. Cryptocurrency prices can fluctuate dramatically over short periods, Bitcoin has experienced drawdowns of 50% or more in past cycles. If the value of your pledged crypto drops below a certain threshold relative to your loan amount, you may face a margin call requiring you to post additional collateral or repay part of the loan. If you cannot meet the margin call, the lender may liquidate some or all of your crypto at whatever the current market price happens to be, potentially locking in significant losses.
Interest rate and cost differences
Crypto-backed loans typically carry higher interest rates than conventional prime mortgages. As of 2025–2026, rates for crypto-collateralized loans may range from mid-single digits to mid-teens in annual percentage rate (APR), plus fees for origination, custody, and legal structuring. Over the life of a long-term obligation, these additional costs can add up meaningfully compared to a standard mortgage.
Regulatory and custody risk
The regulatory framework for crypto-backed lending continues to evolve. Changes in how digital assets are classified, how custody must be managed, or how lending platforms must operate could affect the terms of existing loans or limit the availability of new ones. Additionally, while many lending platforms have strengthened their custody practices since the 2022 credit cycle, with features like regulated custodians, no rehypothecation, and segregated client accounts, counterparty risk remains a factor. Borrowers should understand how their collateral is held and what protections are in place.
Effective risk management practices, such as maintaining conservative LTV ratios, holding liquid reserves for margin requirements, and stress-testing your position against historical drawdowns, can help mitigate some of these risks, though they cannot eliminate them entirely.
FAQ
Can I use Bitcoin to buy a house without selling it?
Yes, it’s possible in principle. The most common approach is to borrow against your Bitcoin through a crypto lending platform, receive the loan proceeds in fiat currency or stablecoins, and use those funds for your home purchase. This way, you retain ownership of your Bitcoin as long as you make loan payments and avoid a liquidation event. However, this requires sufficient Bitcoin to support a large enough loan at conservative LTV ratios, and you will still need to qualify for any additional mortgage on the property.
What is a typical loan-to-value ratio for crypto-backed loans?
Conservative institutional lenders typically offer LTV ratios around 40% to 50% for Bitcoin. This means $100,000 in BTC might support a loan of roughly $40,000 to $50,000. DeFi platforms may allow higher LTVs, up to 80% or more, but these carry substantially greater liquidation risk because a smaller price drop is enough to trigger an automatic sell-off of your collateral.
Do I still need a regular mortgage if I use crypto as collateral?
In most cases, yes. Unless your crypto-backed loan is large enough to purchase a property outright, you will likely combine it with a conventional mortgage. The crypto-backed loan typically covers the down payment or a portion of the purchase price, while a standard mortgage from a lender covers the remainder. Both obligations will need to be managed simultaneously.
Is a crypto-backed mortgage taxable?
Borrowing against crypto generally does not trigger a taxable event in many jurisdictions, because you are not selling or disposing of the asset. This can be a significant advantage compared to selling crypto directly and realizing capital gains. However, tax rules vary by country and individual circumstances, and interest on crypto-backed loans may or may not be deductible depending on how the funds are used and local tax law. Professional tax advice is recommended.
What happens if the price of my crypto drops after I take out the loan?
If your crypto collateral drops below a certain threshold, the margin call LTV, your lender will typically require you to post additional collateral or repay part of the loan. If you cannot do so, the lender may sell some or all of your crypto to bring the loan back within acceptable risk parameters. This is known as forced liquidation and can result in the loss of your crypto at potentially unfavorable prices, while you may still be obligated to repay any shortfall on the loan.
Closing Thoughts
Crypto-backed mortgages represent an emerging bridge between traditional real estate finance and the growing digital asset economy. While the underlying mechanics, using an asset as collateral to secure a loan, are well established, the specific application to cryptocurrency is still maturing.
For the right borrower in the right circumstances, particularly those with significant crypto holdings who wish to preserve their exposure while accessing liquidity, these structures can be worth exploring. However, the combination of crypto volatility with the long-term nature of mortgage debt creates risk dynamics that are different from either traditional mortgages or standalone crypto lending.
Further Reading
What Is Rehypothecation Risk in Crypto Lending?
A Beginner's Guide to Binance Loans
What Is Margin Trading?
Forced Liquidation
Custody
Disclaimer: This content is presented to you on an "as is" basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal, or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third-party contributor, please note that those views expressed belong to the third-party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.
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