How Crypto-Backed Mortgages Work For Homebuyers
Homebuyers can get funds to buy a house using crypto as collateral, meaning they don't have to meet traditional lending requirements for income, credit, and more.
Cryptocurrencies like Bitcoin and Ethereum are increasingly accepted as mainstream forms of payment by more vendors and institutions. So it’s little wonder that many lenders today will allow you to use crypto for a mortgage loan.
What exactly is a crypto-backed mortgage, how does it work, and how is it different from a traditional home loan?
What Is a Crypto-Backed Mortgage?
A crypto-backed mortgage permits you to use cryptocurrency, such as Bitcoin or Ethereum, as collateral, instead of cash or other assets, to finance the purchase of a home. Your pledged crypto is held by a lender who then provides a mortgage loan in exchange.
“The lender holds your crypto – usually in a secure escrow account or custody arrangement – and advances you a loan, typically in U.S. dollars, to buy the property,” explains Fei Chen, founder of the AI Crypto market analysis platform Intellectia.ai. “In other words, you don’t sell your crypto in this arrangement; you lock it up in exchange for cash to buy a home.”
While these types of loans are relatively new and less widespread than conventional mortgages, they’re steadily gaining interest among tech-forward buyers.
The lender holds your crypto – usually in a secure escrow account or custody arrangement – and advances you a loan, typically in U.S. dollars, to buy the property.
How Do Crypto Mortgages Work?
With a crypto mortgage, your monthly payments work like a traditional mortgage loan: You pay back the amount you borrow plus interest over time. If you put up enough crypto to fully back your home’s worth, your payments are still based on the loan amount you borrowed, not the collateral’s worth.
So long as you stay current on your mortgage payments, your crypto remains secure, and you hold on to any potential future crypto profits. But if you miss payments or default, your lender has the right to sell your crypto to recover the loan balance.
The Benefit for Buyers
This approach allows crypto holders and investors to purchase real estate without cashing out their digital assets. It’s an attractive option if you are confident in your crypto’s long-term growth.
Keep in mind that cryptocurrency prices can swing dramatically. As a result, lenders typically demand a significant amount of collateral. In many cases, this means pledging a crypto amount equal to or even exceeding the property’s purchase price. Case in point: A $500,000 home might require you to pledge $500,000 or more in crypto.
Some lenders offer a hybrid option whereby you can make a partial cash down payment (commonly around 20%) while using your crypto as supplemental collateral to lock in better rates or finance a larger portion of the purchase.
Crypto Mortgage vs. Traditional Mortgages
A crypto-backed mortgage is different from a traditional home loan in several ways:
Collateral: A traditional mortgage uses your home as collateral. But a crypto mortgage uses your crypto portfolio as collateral to secure the loan, typically equal to the loan amount. In short, your crypto is at risk, not your home.
Down payment: Traditional home loans require a cash down payment upfront, often between at least 3% and 20%. A crypto loan, however usually requires no cash down payment.
Credit/income requirements: “Traditional lenders demand strong credit scores and verified income. Crypto lenders, on the other hand, focus on your crypto’s value, often skipping credit or income checks,” notes Steven Glick director of mortgage sales for HomeAbroad.
Closing timeline: Typical mortgage loans take 30 to 45 days to close due to appraisals and paperwork involved. Crypto mortgages close much more quickly, sometimes in as little as 1 to 2 weeks or less.
Chen says a big distinction here is the credit and income rules.
“Crypto mortgages usually focus on the value of your assets, not your credit score or income,” he adds. “You can often borrow without impacting your credit because the loan is backed by crypto wealth, which means that if you have spotty credit or no conventional paystubs, you might still qualify with your crypto holdings.”
Crypto for Traditional Mortgages (Fannie Mae, Freddie Mac, FHA, VA, USDA)
You can still use cryptocurrency for a traditional mortgage, but not directly.
Cryptocurrency can be converted into U.S. dollars and used for a down payment on a traditional mortgage, as long as the funds are first deposited into a standard bank account. According to the National Association of Realtors, about 1% of all homebuyers, including first-time buyers, use proceeds from crypto sales to help fund their down payment.
Lenders have strict guidelines regarding the source and history of down payment funds. You’ll need to show proof that you owned the crypto for at least 60 days prior to converting it, which could be difficult depending on your crypto exchange service. Otherwise, converted funds may need to sit in your bank account for 60 days before they’re eligible for use.
Accepted Crypto Types
While each lender that accepts crypto funds has its own rules on what types of cryptocurrency they will accept, most allow assets like Bitcoin and Ethereum.
“Many also allow large stablecoins such as USD Coin or Tether,” continues Chen. “The common theme here is liquidity and transparency; lenders want coins they can easily value and sell if needed. Rare altcoins or unproven tokens are generally not accepted because they are too risky or illiquid.”
Glick adds that less common coins, like Dogecoin or meme tokens, are rarely allowed due to their wild price swings and lower market trust. Some lenders allow a mix of different major coins like Bitcoin, Ethereum, and USD Coin.
Very few lenders offer crypto mortgages. There are some known players like Milo, Figure, and Ledn, but even they have strict requirements and may serve limited areas or customer profiles.
Finding a Lender
Financial expert Baruch Mann, CEO of The Smart Investor, cautions that crypto-backed mortgages are still new and risky for traditional banks, so most lenders worry about crypto’s volatility and unclear regulations.
“That’s why very few offer crypto mortgages. There are some known players like Milo, Figure, and Ledn, but even they have strict requirements and may serve limited areas or customer profiles,” he says.
Josip Rupena, CEO of Milo, points out that crypto remains a young market shaped by evolving regulations and risk frameworks.
“Mortgage lending, in particular, is highly regulated and scrutinized, making it difficult for new entrants,” he notes.
Applying for a crypto mortgage is similar to what’s involved with a traditional home loan, according to Rupena:
Complete an online application with your chosen crypto lender. Share details about the property you want to purchase, your finances, and the crypto you plan to use as collateral.
The lender evaluates the property and your financial profile, then provides loan terms including structure, interest rate, and repayment schedule.
Once you agree to the terms, the lender performs a check to verify the legitimacy of your crypto holdings.
Just before closing, you transfer your crypto collateral into a secure, institutional-grade custody account.
After the collateral is received, the loan is funded. Your crypto remains securely held, and you begin making monthly payments.
Advantages of Crypto Mortgages
There are many pros to opting for a crypto-backed mortgage, including:
You get to keep your crypto gains without having to sell your cryptocurrency, allowing you to avoid taxes and retain future price upside.
No down payment is required, enabling you to borrow up to 100 percent of the home’s value using crypto, freeing up your cash.
Approvals are typically faster. “Blockchain cuts paperwork, closing loans in days or weeks instead of months,” Glick says.
Crypto approvals don’t require credit scores or credit checks, making them ideal for borrowers with limited or less-than-perfect credit. “Also, self-employed or irregular-income borrowers qualify easily, as income isn’t verified,” continues Glick.
Holding crypto long-term can defer capital gains taxes on the crypto itself because you don’t pay taxes until you sell or otherwise dispose of the asset.
There’s usually no private mortgage insurance required because the crypto acts as collateral.
You’ll diversify your portfolio using crypto to purchase real estate.
Disadvantages and Risks of Crypto Mortgages
As mentioned, crypto mortgages come with downsides, the biggest being volatility.
Price Swings
“Crypto prices swing wildly, so if the collateral value plunges, you face a margin call or forced sale of your pledge coins,” says Chen.
Put another way, if your cryptocurrency’s price drops sharply, you might be forced to sell off your holdings to pay back the loan.
Also, understand that the value of crypto used as collateral is not a certain amount. Although its value often needs to be 100% of your loan amount, the value of cryptocurrency is ever-changing; if it drops below a certain threshold as determined by your lender, you must make up that difference or they can liquidate your crypto without notifying you.
To decrease the volatility liability of a crypto mortgage, experts recommend different strategies:
Consider using stablecoins like USD Coin or Tether, which are pegged to the dollar and don’t fluctuate as much as other cryptocurrencies.
Overcollateralize by pledging more crypto than the minimum required, which creates a buffer if market prices drop.
Combine crypto collateral with a cash down payment, which reduces exposure to price swings.
Monitor market conditions and be prepared to add collateral or adjust terms if necessary.
Choose a trusted, reputable lender that’s transparent about how they handle collateral and liquidation policies.
Can’t Sell the Crypto
Also, if you want to sell your crypto while it’s being used to back the loan, you’ll likely need to either pay off the mortgage or replace the collateral with other crypto or cash, depending on your lender’s rules.
Higher Interest Rates
What’s more, interest rates on these loans can often be higher and vary depending on the lender and crypto market conditions.
Lender Solvency
Another minus is liquidity and custody. If your lender financially falters or goes bankrupt, retrieving your crypto can be problematic. Don’t forget that your crypto collateral is locked up in a separate account until the loan is repaid or refinanced.
No Consumer Protection
“There’s also regulatory uncertainty. Remember that these loans aren’t backed by government mortgage insurers or banks, so there’s no FDIC or Consumer Financial Protection Bureau-level protection and little legal precedent,” Chen cautions. “In fact, Fannie Mae won’t purchase these loans, so the lender bears all the loss risk.”
What’s more, terms can be uncertain and differ broadly across lenders, so you have to be careful when proceeding. Review the fine print carefully and understand when a lender can liquidate or convert assets.
“There is a reputational/scam risk, too. You only want to deal with well-established firms because the crypto space has seen fraudulent or undercapitalized lenders,” adds Chen.
There is a reputational/scam risk, too. You only want to deal with well-established firms because the crypto space has seen fraudulent or undercapitalized lenders.
Good Candidates for a Crypto-Backed Mortgage
Worthy prospects for crypto-backed mortgages include:
Investors and individuals with significant crypto holdings who want to leverage their assets but don’t want to sell their coins. “If you’ve got $200,000 or more in crypto and believe it will grow, this allows you to purchase a home while keeping your assets,” Glick points out.
Those with limited credit history, including international buyers and young investors.
Self-employed individuals or those with irregular earnings or non-traditional income sources.
Consumers seeking an alternative to traditional bank loans.
What’s Needed to Get a Crypto-Backed Mortgage
While every lender has its own criteria, to qualify for a crypto-backed mortgage, you’ll likely need:
Substantial crypto holdings. “Expect to have far more crypto than your loan. For example, a lender might require collateral at, say, 150 percent of the loan amount. Using this example, purchasing a $500,000 home at 40 percent loan-to-value would mean staking $200,000 in crypto,” says Chen. For a 100 percent crypto mortgage offered by Milo, Rupena says a 1:1 value ratio is required, such as $500,000 in Bitcoin or Ethereum for a $500,000 home.
Proof of crypto ownership. You’ll likely transfer the pledged crypto into an approved escrow account. The lender may require wallet addresses or screenshots to validate that you have the necessary balance.
Identity verification. Prepare to provide government-issued identification, proof of address, employment/income details, and documentation proving the source of funds.
To prepare your crypto holdings for use, these steps are typically needed, per Chen:
Verify accepted cryptocurrencies: Check which digital assets the lender will allow for collateral, like Bitcoin, Ethereum, or USD Coin. If you’re holding unsupported coins, convert them early to avoid last-minute complications.
Organize your transaction history: Compile complete records of your crypto activity, including wallet statements, exchange reports, and blockchain transaction logs, to prove the origin and legitimacy of your funds.
Secure your assets in an approved wallet: Transfer your crypto to a trusted, lender-approved wallet or custodial service, since you’ll eventually need to move the collateral into their escrow system for the loan.
Keep your holdings steady before applying: Avoid large trades, transfers, or new crypto activity close to your mortgage application date. Lenders prefer to see a clean, consistent track record of ownership.
Confirm compliance and licensing: Make sure your funds come from legitimate sources and double-check that your chosen lender is properly licensed and compliant with relevant state and federal crypto lending regulations.
Consult an experienced advisor: Work with a mortgage broker or lending specialist familiar with crypto-backed loans to get clear guidance on required paperwork, documentation formats, and timing.
The good news is that you can likely refinance a crypto-backed mortgage if your lender allows it.
“Some borrowers switch to a traditional mortgage loan later to lock in lower interest rates or reduce risk,” Mann says. “In this case, you would typically refinance after improving your credit or if your crypto has grown in value.”
Some crypto lenders could permit you to refinance your balance into another crypto-backed loan, while other lenders may allow you to convert it into a traditional loan if your financial situation has improved. Obtaining a new traditional home loan to refinance can involve selling your crypto and qualifying under the same set of criteria as a more traditional mortgage.
To refinance to a conventional mortgage loan, you’ll need to meet standard lending requirements for credit, income, and other factors and also remove the crypto from collateral, which may trigger a tax event.
“However, refinancing into a traditional mortgage may not be practical, especially if you originally qualified with 100 percent crypto and no cash down,” cautions Rupena. “In most cases, transitioning to a traditional mortgage would require bringing cash to the table, since conventional lenders won’t recognize crypto as an eligible asset for qualification.”
Conclusion
A crypto-backed mortgage allows you to use cryptocurrency as collateral for a home loan without selling your coins. Fortunately, instead of relying on credit scores or income, a participating lender will review the value of your crypto, but this often requires a large amount to cover market swings.
This form of financing offers no cash down payment and quick approvals but comes with risks like price volatility, higher rates, and limited lender options. They’re a good fit for crypto investors, self-employed buyers, and those with non-traditional finances — though it’s important to vet lenders, prep your documents, and fully understand the terms before signing.
