The Difference Between Bitcoin Mortgages And Bitcoin-Backed Loans

Forbes

19 hours ago

Salvadoran artisan Crisanta Cruz sells souvenirs with the B of bitcoin and also receives payments in ... More that cryptocurrency in the park of Berlin, El Salvador on January 20, 2025. Bitcoin enthusiasts seeking to turn a mountain town in El Salvador into a cryptocurrency haven hope that US President Donald Trump's return to the White House will boost their cause. (Photo by Marvin RECINOS / AFP) (Photo by MARVIN RECINOS/AFP via Getty Images)
Financial innovation often comes out of necessity– that's how my family and I got into bitcoin. Growing up in a hyperinflationary economy, I learned that on Friday afternoons, you had two jobs: the one that earned you money from 9-5, and a second job converting your paycheque into something that wouldn't be worthless by Monday. I also learned that being good at your 'second job' was infinitely more consequential to your financial success.
Today, bitcoiners face a similar challenge. They're sitting on substantial wealth, but when it comes to buying a home, should they sell the asset that built their wealth? Traditional banks look at a buyer's employment income, credit score, and expect to transact in local currency. If bitcoiners sell for USD, they'd likely trigger massive tax bills and watch from the sidelines as their former holdings appreciate faster than the house they just bought.
Here's an interesting stat: In 2022, someone buying a house would've needed to sell about $188,000 worth of bitcoin (accounting for capital gains tax) to make a $160,000 down payment. That bitcoin would be worth over $1.25 million today. When you factor in capital gains taxes (15-40% depending on jurisdiction) plus the opportunity cost of bitcoin's foregone appreciation, that "cheap" 3% mortgage becomes the most expensive money you'll ever borrow.
There is a better way for bitcoin holders to access their own wealth without destroying it.
The FHFA News
The Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to consider cryptocurrency holdings in mortgage risk assessments so that crypto assets could be counted towards a borrower's assessment without conversion to U.S. dollars—a landmark acknowledgment that modern wealth doesn't always sit in traditional bank accounts.
But here's the reality check: most mortgage qualification criteria are still limited by income tests. The asset test is often a secondary factor. You might have significant bitcoin holdings, but if you don't have W-2 or taxable income that fits their ratios, you're still out of luck.
For many bitcoin holders, selling their crypto to help qualify for a mortgage means incurring massive capital gains taxes and giving up future upside. In contrast, borrowing against their bitcoin preserves wealth, provides flexibility, and avoids the gruelling process of traditional underwriting. We've seen firsthand how this empowers people globally—from early adopters to entrepreneurs—who now have access to financing on their terms.
Banks Don't Get Bitcoin (And That's Their Problem, Not Yours)
Traditional mortgages are built for people with predictable and taxable salaries. But that's not the reality for most successful people today. Entrepreneurs, self employed professionals, and early bitcoin adopters have wealth, just not in the neat little boxes banks require for a mortgage.
Borrowing against bitcoin takes this one step further than the FHFA proposal—not just using bitcoin as one of the qualification criteria for the mortgage, but basing the credit worthiness entirely on the bitcoin asset itself. This simplifies the process versus a traditional mortgage which requires income and other types of verification to qualify.
This is where bitcoin shines as pristine collateral. A bitcoin in Colombia is identical to a bitcoin in Canada. It trades 24/7, has deep liquidity, and doesn't care about borders or banking hours.
The Beauty of Not Selling
When you borrow against your bitcoin instead of selling it, there's no credit check, your bitcoin is your credit worthiness. You don't trigger any capital gains tax in most jurisdictions. You keep the upside when bitcoin appreciates. Taking a loan against your bitcoin happens in hours, not months like traditional mortgages.
Bitcoin-backed loans open up new investment possibilities. You can keep your loan and gradually repay it over several years. Collateral appreciation can offset the interest accrued while your bitcoin stack keeps growing.
It's true that major banks are finally waking up to bitcoin's value proposition, and that U.S. regulators are signalling stronger support for this industry. We're at an inflection point. But here's what really excites me: This isn't just about the wealthy getting wealthier. When I discovered bitcoin mining in Venezuela, it wasn't just the technology that blew my mind; it was watching how anyone could convert electricity into hard money that could be used to opt out of a corrupt and unfair system. The regime's tyrannical efforts to control and extinguish their savings were futile against their newfound freedom money.
That same democratization is happening with financing. The person taking a sliver of their paycheck to buy bitcoin and build their stack now has access to the same financial tools as Michael Saylor. That's revolutionary and empowering.
The New Playbook
With bitcoin-backed loans, there should be no reliance on made up tokens and complex underwriting. Bitcoin is the innovation. Bitcoin is the credit worthiness.
These new loans make financing very simple: You borrow against your own assets. Your bitcoin is collateral. No income verification– you already own it. No employment history– you already own it. No geographic restrictions– it's the same everywhere.
The lending market is about to get very competitive, and that's fantastic for consumers. As more banks enter the space, rates will come down. Bitcoin-backed loans will become as normal as home equity lines of credit, but this time, the entire world has access to owning Manhattan real estate on the internet– not just New Yorkers!
In the old world you had to choose between your digital bitcoin wealth and your real life dreams. In the new world, bitcoin can enable those dreams, without having to sacrifice your stack.
For someone who's seen bad money die, and who's watched families lose everything to currency debasement, Bitcoin is hope. Now, with proper lending infrastructure, that hope is transforming into opportunity.
Welcome to the new economy. One where your bitcoin will be your credit score, and your jet fuel.