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What are Crypto Backed Mortgages and How Do They Work?

What are Crypto Backed Mortgages and How Do They Work?

Introduction

The rapidly growing cryptocurrency market has given rise to a new type of mortgage product called crypto-backed mortgages. As the name suggests, these home loans allow you to use your cryptocurrency holdings as collateral instead of a traditional cash down payment. With the potential for significant appreciation in crypto assets, many investors are exploring crypto mortgages as a way to buy property without liquidating their digital currency investments. In this article, we'll explain what crypto-backed mortgages are, how they work, their pros and cons, and answer other frequently asked questions.

What are Crypto Backed Mortgages?

A crypto-backed mortgage is a loan that allows you to purchase or refinance a home by putting up your cryptocurrency holdings as collateral instead of making a down payment in cash. The lender will determine the maximum loan amount based on the current value of your crypto assets pledged as security.

How Do Crypto Mortgages Work?

Here's a step-by-step look at how crypto-backed mortgages typically work:

  1. Find a Lender: Research cryptocurrency mortgage lenders and compare interest rates, fees, eligible crypto assets, and other terms.

  2. Apply and Get Pre-Approved: Submit a loan application along with proof of your crypto asset ownership. The lender will evaluate your crypto portfolio and other factors like credit history to pre-approve you for a maximum loan amount.

  3. Pledge Crypto Collateral: If approved, you'll transfer your cryptocurrency to an escrow account managed by the lender as collateral for the mortgage.

  4. Close on the Loan: Finalize the loan paperwork and receive the mortgage funds, usually in US dollars, to purchase the property. No down payment is required since your crypto assets serve as collateral.

  5. Make Payments: Repay the mortgage according to the agreed terms, typically with monthly payments. The interest rate may be variable based on the market value of your pledged crypto.

  6. Regain Collateral: Upon fully repaying the loan, your cryptocurrency collateral is released back to you from the escrow account.

The Over-Collateralization Factor

Crypto mortgages are over-collateralized, meaning the total value of the collateral (your crypto assets + the home itself) exceeds the loan amount as an extra safeguard for the lender. This eliminates the need for a down payment since the combined collateral covers the full mortgage value.

For example, if you get a $400,000 mortgage using $400,000 worth of Bitcoin as collateral, the lender effectively has $800,000 in total pledged collateral.

Accepted Cryptocurrencies

Most lenders limit eligible collateral to major cryptocurrencies like Bitcoin, Ethereum, and stablecoins due to their higher liquidity and lower volatility compared to niche altcoins.

Pros of Crypto Mortgages

  • Avoid selling appreciated crypto to fund a down payment and missing future upside

  • No capital gains tax since your crypto remains unmoved

  • Easier qualification than a traditional mortgage, especially for foreign buyers

  • Faster approval and funding timelines

  • Access home equity while keeping crypto invested

Cons of Crypto Mortgages

  • Volatility risk – you may need to add collateral if your crypto's value drops significantly

  • Regulatory uncertainty around crypto mortgages in some regions

  • Fewer consumer protections compared to traditional mortgages

  • Tax implications if your collateral must be forcibly liquidated

Crypto Mortgages vs Traditional Mortgages

While crypto mortgages share some similarities with regular mortgages, there are a few key differences:

  • Collateral: Crypto vs cash down payment

  • Approval Requirements: May have easier income/credit requirements

  • Closing Timelines: Crypto mortgages can close faster (0-30 days vs 30-60 days)

  • Regulations: Fewer lending laws and oversight for crypto mortgages currently

Managing Volatility Risk

The main risk of crypto mortgages is the price volatility of the cryptocurrency used as collateral. If the value of your pledged crypto drops below the lender's required loan-to-value threshold, you may face a "margin call" to deposit additional crypto to maintain your loan's collateral coverage.

Failing to add more collateral could result in the lender seizing and liquidating your original crypto deposit to recover their funds – a taxable event.

Who Are Crypto Mortgages For?

Crypto-backed mortgages can benefit:

  • Crypto investors who want to access home ownership without selling their holdings

  • Crypto holders who lack cash savings for a traditional down payment

  • Foreign nationals looking to invest in US real estate using crypto

  • Real estate investors aiming to leverage crypto to build real estate portfolios

  • Individuals who can't qualify for a traditional mortgage

How To Get A Crypto-Backed Mortgage

Following the 2022 crypto crash and amidst rising interest rates, major players like Figure and USDC Homes ceased offering crypto-backed mortgages. In response, crypto holders turned to alternatives, securing loans from crypto lenders like Arch for down payments, while obtaining mortgages from traditional lenders.

Final Thoughts

Crypto mortgages offer an innovative way for cryptocurrency holders to tap into their investment gains for major purchases like homes. However, their unique structure, volatility risks, and evolving regulations mean crypto-backed loans may not suit everyone's needs. As with any mortgage product, carefully consider the pros and cons to determine if a crypto mortgage aligns with your financial situation and investment strategy.

About Arch

Arch is building a next-gen wealth management platform for individuals holding Alternative Assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services, powered by BitGo.

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are current not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved