What are Crypto-Backed Mortgages? Leverage Bitcoin To Buy a House

The future of mortgage lending is already taking shape, and one of the most exciting shifts is the idea that digital assets can finally play a role in how borrowers qualify. For years, Bitcoin and Ethereum sat outside the boundaries of traditional finance—acknowledged as an asset class by alternative investors but ignored by banks. Now, the term crypto-backed mortgage is creating new pathways into homeownership. But here’s the catch: it doesn’t mean the same thing everywhere. Some lenders structure these loans in ways that tie up your assets or charge punishing interest rates. Others, like LendFriend, have refined the model into a tool that actually works for investors, letting crypto count toward your financial strength without forcing you to sell it off.

This article explains the different flavors of crypto-backed mortgages, where they help and where they hurt, and how the right structure can let you hold onto your digital wealth while stepping into real estate. Think of it as a spectrum: at one end are collateralized products that keep your crypto locked away at high interest rates, at the other end are conventional lenders who won’t touch it unless you sell. Somewhere in the middle—and far more useful—is a program that treats your crypto as legitimate wealth you can leverage, without losing access or paying a tax bill. That’s the approach we’ve developed at LendFriend, and it’s the reason more investors are finally turning their digital gains into real property.

The Many Meanings of a Crypto-Backed Mortgage

When you hear the term, it might sound like you’re literally buying a house with Bitcoin. In reality, the structure depends heavily on the lender and the way they interpret digital assets in an underwriting file.

Collateralized crypto mortgages are the most well‑known version, typically offered by fintechs like Ledn and Milo. These products require borrowers to pledge their coins as collateral, sometimes at a one‑to‑one ratio with the loan amount. Once pledged, your crypto is effectively locked up for the life of the loan. If prices swing lower, you may face margin calls that force you to deposit more collateral or risk liquidation. On top of the lockup risk, interest rates can climb into the 9-10% range—levels far higher than what most borrowers would accept on a traditional mortgage. For investors who are used to seeing their crypto portfolios double in a bull market, the idea of paying double‑digit mortgage interest just to buy a house feels like a raw deal.

Traditional lender interpretations go to the opposite extreme. Most banks won’t recognize crypto at all unless you liquidate it, season the cash in your account, and present a paper trail. That means you’re forced to sell coins, trigger capital gains, and write a check to the IRS before you ever move into a new home. You also give up your upside if the market rallies after you sell. For long‑term investors who see crypto as a core part of their wealth, liquidation is not only unattractive—it’s financially punitive.

Hybrid or niche models have started to pop up too, often marketed as innovative but in practice combining the worst of both worlds. Some require partial liquidation plus collateral pledges, while others advertise flexibility but hide high origination fees and restrictive terms in the fine print. Borrowers lured by the promise of using crypto quickly discover that the cost of entry is steep.

None of these paths is ideal. One ties up your wealth at high cost, the other strips it away with tax consequences, and the so‑called hybrids rarely deliver the balance investors are seeking. At LendFriend, we've built a better way. That’s why we go deeper in the sections below to explain exactly how LendFriend approaches crypto-backed mortgages differently, and why our structure avoids the pitfalls of these other models.

Why Traditional Lenders Don’t Understand Crypto

The U.S. mortgage system is designed around steady paychecks and conventional assets. Underwriters like predictability: W‑2s, tax returns, and bank statements. Crypto disrupts that model. Volatility makes banks nervous, and regulatory guidance has been slow. For many lenders, the easiest option is to ignore crypto altogether. But ignoring it leaves many high‑net‑worth investors locked out of homeownership opportunities.

Consider the investor who bought Bitcoin at $5,000. Selling today to qualify for a mortgage could mean hundreds of thousands in taxable gains. Worse, it could mean missing the next rally. Traditional underwriting leaves these borrowers without good options.

That’s because the system is built on conformity. Underwriters operate like cogs in a machine, rewarded for following rules, not for exercising judgment. If the guidelines don’t explicitly recognize crypto, the safest move for them is to treat it as invisible. To the investor, this feels absurd—you can hold millions in Bitcoin or Ethereum, yet still be told you don’t qualify for a loan because it doesn’t fit in a checkbox. It’s not that the wealth isn’t real. It’s that the machine can’t process it. And until you work with a lender who understands how to bridge that gap, traditional banks will continue to leave crypto investors on the outside looking in.

Even in 2025, the Federal Housing Finance Agency asked Fannie Mae and Freddie Mac to explore how crypto could fit into mortgage guidelines. But even if adopted, crypto will likely count only as reserves—not qualifying income. That leaves a gap that innovative lenders like LendFriend already fill. We don’t wait for Washington; we provide solutions today.

LendFriend's Crypto-Backed Mortgage Product: A Cut Above the Rest

LendFriend takes a different approach—one that solves the problems collateralized lenders create and avoids the blind spots of traditional banks. Instead of forcing liquidation or collateralization, we apply an asset depletion model, a formula already trusted for stocks, bonds, and retirement accounts but adapted for digital assets.

Here’s how it works in detail:

1. Verify your holdings. We confirm balances in secure accounts, whether on exchanges, in cold storage, or with custodial wallets, so the assets you’ve worked hard to build are recognized as legitimate.

2. Calculate your qualifying income based on your holdings. To qualify you for the mortgage, we simulate what your income would be if you were to liquidate over time. We discount asset values to account for volatility, then divide the adjusted amount over a set term (5-7 years). This calculation produces a steady, reliable stream of “qualifying income” that satisfies underwriters without stripping away your upside.

3. Deliver a real mortgage with competitive pricing. That calculated income is then treated like any other source for underwriting, allowing borrowers to secure products such as fixed‑rate jumbo loans and non‑QM programs—at rates that currently sit around 7% and are far more competitive than the 9–10% collateralized options in the market.

The key difference: your assets remain under your control. No lockup, no margin calls, no tax event. And because our broker model connects you to a broad network of lenders, we can shop the best terms available, ensuring your crypto strengthens your application instead of complicating it.

Delivering Real Solutions For Bitcoin Investors

In Northbrook, Illinois, we recently helped a client with roughly $6 million in Bitcoin purchase a $2 million home. Traditional lenders saw little income on paper and would not approve. Using our crypto asset depletion approach, the borrower qualified for a $1.35 million mortgage while keeping every coin in their account. The client avoided capital gains tax, preserved future upside, and moved into their new home without compromise.

Why Asset Depletion Beats Collateralization

• No capital gains tax. Since you’re not liquidating, you avoid taxable events.

• No lockup. Your crypto stays in your wallet or exchange account, not with the lender.

• No margin calls. Market dips won’t trigger forced liquidation.

• Competitive rates. Pricing is much closer to standard non-QM or jumbo loans than to the double-digit rates seen in collateralized models.

Texas and California Examples

In Texas, self-employed tech workers and entrepreneurs often struggle to qualify with traditional lenders. Crypto-backed mortgages allow them to leverage their real wealth without a W‑2. In California, early crypto adopters face massive potential tax bills if they liquidate holdings. Asset depletion qualification lets them diversify into real estate without sacrificing future growth.

Which Homebuyers Benefits Most From Crypto-Backed Mortgages

Crypto-backed mortgages are best for:

• Early adopters with significant unrealized gains.

• Investors seeking primary residences, second homes, or rentals.

• Tax-conscious buyers who want to preserve upside while avoiding capital gains.

Frequently Asked Questions About Crypto-Backed Mortgages

Do I have to sell my Bitcoin or Ethereum to qualify?
No. With LendFriend’s program you keep your assets under your control. We use asset depletion math to translate your holdings into qualifying income—no liquidation required.

What happens if the price of crypto drops after I close?
Unlike collateralized products, our approach does not involve margin calls or forced liquidations. Once you close, your mortgage terms are fixed, regardless of short‑term volatility.

Can I use crypto to buy an investment property, or is this only for primary homes?
You can use our crypto‑backed program for primary residences, second homes, and investment properties. We build the structure around your goals, not just your occupancy status.

Does crypto count the same way as stocks or bonds?
Yes. We apply a conservative haircut for volatility, but the methodology mirrors how asset depletion works for brokerage or retirement accounts. It’s simply an extension of an existing, well‑understood framework.

What states can I use this program in?
LendFriend is licensed in multiple states including Texas, California, Connecticut, Colorado, Florida, Illinois, Virginia, and more. We’re continuously expanding to serve crypto investors nationwide.

What type of rates can I expect?
Rates vary with credit profile and loan size, but they are far more competitive than the 9–10% seen with collateralized lenders. Our crypto‑backed clients often secure terms similar to other non‑QM or jumbo loan borrowers.

The Bottom Line

Crypto-backed mortgages mean very different things depending on the lender. Collateralized products can be expensive and risky. Traditional lenders push liquidation and taxes. LendFriend’s approach—asset depletion without liquidation—offers a smarter path.

At LendFriend Mortgage, we’ve built the country’s best crypto-backed mortgage program. Whether you’re buying your first home, your next investment property, or your forever dream house, we’ll help you do it without selling a single coin.

👉 Learn more about LendFriend’s Crypto-Backed Mortgages. Schedule a call with me today or get in touch with me by completing this quick form and I'll help you leverage your crypto wallet to buy a home today.