Crypto owners can now use their digital assets as collateral for their down payments to buy a home. That’s because Fannie Mae is accepting crypto-backed mortgages for the first time through a partnership between mortgage company Better Home & Finance and crypto exchange Coinbase, according to a Tuesday statement.
The move aims to make home ownership more accessible to a younger demographic, who are more likely to own crypto. “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,” said Max Branzburg, head of consumer and business products at Coinbase, in the statement.
The goal of the product is also to help those who might be crypto-rich but cash-poor. The homebuyer would take out a traditional 15 or 30-year mortgage but instead of making down payment in cash, they would take out a separate loan backed by their Bitcoin or stablecoin holdings. This new offering would allow them to hold on to their crypto and not have to sell it and pay capital gains taxes. The downside is that the second loan would increase the overall cost of homeownership since the buyer would also have to service that second loan.
The homebuyer can’t trade the crypto assets once they have been pledged. In the event the digital assets go down in value, the mortgage loans don’t get affected if the owner keeps making the monthly payments.
The product arrives at a time when young people are growing disillusioned with the traditional financial system and sometimes turning to crypto. Gen Z and Millennials say that 25% of their portfolio is in non-traditional assets like crypto, and 73% of people in these generations say it is harder for them to build wealth by traditional means, according to a recent crypto report by Coinbase.
Bitcoin owners have been feeling a squeeze in the past few months, as the original cryptocurrency is down 46% since its all-time high in October to its current price of $68,000, according to Binance.