Why your crypto mortgage rate is higher—but still worth it

If you’re using Bitcoin or Ethereum as collateral for a crypto mortgage, you might be wondering: “Why is my interest rate higher than a traditional mortgage?” After all, if you’re pledging valuable assets like BTC, shouldn’t you get a lower rate?

While the logic makes sense on the surface, the reality comes down to how mortgage rates are set, the cost of capital, and the way financial markets price risk. Traditional mortgages benefit from deep liquidity and government backing—crypto mortgages do not. That fundamental difference is why rates can’t be compared one-to-one. Let’s break it down.

How traditional mortgage rates are set

The role of secondary markets The reason traditional mortgage rates are relatively low is that they are part of an enormous financial ecosystem. When a borrower takes out a conventional mortgage, the bank doesn’t hold onto it forever. Instead, most loans are bundled into mortgage-backed securities (MBS) and sold to investors.

These investors include:

• Government-sponsored entities (GSEs) like Fannie Mae and Freddie Mac
• Institutional investors such as pension funds and insurance companies
• Global bond markets seeking low-risk, long-term returns

Because there is high demand for these mortgage-backed securities, banks can issue loans at lower interest rates, knowing they will easily be sold.

Government backing and stability

Additionally, many traditional loans are insured or backed by government programs like FHA, VA, or GSEs, further reducing risk for lenders. This allows them to offer 30-year fixed rates below 7%, even in higher-rate environments.

Why crypto mortgages don’t have the same rates

Crypto mortgages don’t fit into traditional risk models Unlike conventional home loans, crypto mortgages can’t be bundled into MBS or sold to traditional investors. There is no Fannie Mae for Bitcoin-backed loans, nor a secondary market of pension funds eager to buy them.

That means lenders must keep crypto mortgages on their own balance sheets, absorbing all the risk. Since they don’t have a way to offload these loans, they need to charge a higher interest rate to justify the risk and opportunity cost.

The cost of capital is higher for crypto-backed loans In traditional lending, banks can borrow money at ultra-low rates from the Federal Reserve or depositors’ savings accounts, allowing them to issue mortgages affordably.

Crypto lenders don’t have that luxury.

• They aren’t borrowing funds at near-zero rates.
• They don’t have access to cheap capital markets.
• They rely on private funding sources, which demand higher returns.

Because the cost of capital is higher, the interest rate charged to borrowers must also be higher.

Crypto volatility adds another layer of risk Bitcoin and Ethereum are highly liquid assets, but they are also volatile. A lender holding crypto as collateral faces risks that traditional banks don’t:

• If BTC drops 40% in a month, the loan-to-value (LTV) suddenly changes.
• Lenders may need to issue margin calls or liquidate assets to protect their positions.
• This risk forces lenders to price crypto mortgages at a premium.

Traditional lenders don’t worry about home prices crashing overnight, but crypto lenders must factor in price swings when setting rates.

“But I’m giving you my Bitcoin—shouldn’t I get a lower rate?”

It’s a fair question, but the key difference is liquidity and resale value. If you deposit BTC as collateral, the lender can’t easily use it the same way a bank does with cash deposits or traditional mortgage securities.

Here’s why:

• Crypto collateral is not cash – While Bitcoin is valuable, it’s not something that banks or institutions accept in place of cash reserves.
• The market for crypto-backed loans is still new – Without a well-established secondary market for these loans, lenders must price in higher risk premiums.
• Regulatory uncertainty – While mortgages are governed by well-established laws, crypto lending faces evolving regulations, making institutional investors hesitant to participate.

These factors mean that crypto mortgage lenders operate in a more niche market with fewer funding sources, which ultimately leads to higher rates.

Will crypto mortgage rates become more competitive?

As the industry matures, crypto mortgage rates could trend lower—but that depends on several key developments:

• A stronger secondary market – If institutional investors become more comfortable buying crypto-backed loans, rates could drop.
• More regulatory clarity – If governments create clearer guidelines for crypto mortgages, lenders may gain access to lower-cost funding.
• Stablecoin integration – The rise of stablecoin-backed lending models could create a bridge between crypto and traditional finance.

For now, crypto mortgages remain a niche but growing market. As demand increases and infrastructure improves, rates could become more competitive with traditional loans over time.

Maximizing your crypto’s potential

While crypto mortgage rates are higher than traditional loans, the real question isn’t just about the cost of borrowing—it’s about the cost of missing out.

Historically, Bitcoin and Ethereum have appreciated significantly over time. If you sell your assets to buy a home, you lock in today’s value—but if prices rise, you lose out on future gains.

Consider this:

• If BTC appreciates 30-50% over the next few years, would a 2**% higher mortgage rate** really matter?
• The difference in crypto mortgage rates vs. traditional loans is small compared to the potential upside of holding onto Bitcoin or Ethereum.
• Using a crypto-backed mortgage allows investors to diversify into real estate while keeping exposure to crypto’s long-term growth.

At the end of the day, crypto mortgages aren’t just about the rate—they’re about strategy. The ability to leverage your assets without selling could lead to far greater returns than the cost of a slightly higher interest rate.

As the market evolves, expect greater competition, lower rates, and more structured investment opportunities for crypto-backed home loans. But for now, the decision comes down to one key factor:

Would you rather pay a slightly higher rate or risk missing out on Bitcoin’s next bull run?

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.