Milo is rolling out a mortgage product that lets homebuyers use Bitcoin or Ethereum as collateral without requiring a sale of the underlying crypto. The lender currently operates in 10 states and underwrites the mortgage principal in full — offering financing that covers 100% of the home cost while holding BTC or ETH with approved custodians as collateral.

Mechanics that matter

• Collateral, not sale: Borrowers pledge Bitcoin or Ethereum to approved custodians; the crypto remains theirs until and unless Milo executes a liquidation to cover a delinquency or a shortfall. That structure lets owners avoid triggering capital gains events at the time of loan origination.
• Full underwriting: Milo underwrites the home loan itself (not a crypto loan structured as an overcollateralized advance), distinguishing this model from earlier crypto lending products that required heavy overcollateralization and immediate liquidation risk on price moves.
• Custody and liquidation policy: Custodial partners and clear liquidation mechanics are central — Milo accepts assets only through approved custodians and retains the operational right to liquidate collateral if borrower obligations aren’t met, which creates a controlled fallback against volatility.

Why lenders and borrowers are testing this model

• Tax and accounting: By keeping crypto in custody rather than forcing a sale, borrowers can defer capital gains taxation and maintain exposure to upside, an attractive option for long-term holders who also want to tap home equity.
• Volatility management: Lenders assume market risk differently here. Instead of upfront haircuts that reduce loan size, Milo’s underwriting and liquidation clauses internalize volatility through active monitoring and custodial sell-execution if needed.
• Regulatory tailwinds: The move aligns with increased attention from federal agencies around whether and how crypto can be treated as an eligible mortgage asset, prompting experimentation by nonbank lenders to bridge retail mortgage infrastructure with digital-asset custody.

Risks and plumbing

• Liquidation risk remains real: Even with custodial safeguards, rapid price moves could force a sale at inopportune times, producing the same downside a borrower seeks to avoid by not selling.
• Operational integration: Mortgage servicing, escrow flows, title work and foreclosure pathways must be adapted to incorporate custodian APIs, on-chain valuation feeds and clear legal pathways for collateral transfer or sale.
• Compliance and valuation: AML/KYC, provenance of assets, and standardized valuation windows will be focal points for both lenders and examiners as these products scale.

Market implications

• Mainstream acceptance: If the product finds traction, it could broaden the set of financial use-cases for long-term crypto holders without forcing liquidation — expanding demand for custody services and creating new intersections between real estate finance and digital-asset infrastructure.
• Liquidity dynamics: The arrangement shifts when and how crypto liquidity enters markets — instead of predictable periodic sales, liquidity could be episodic and tied to mortgage performance and margin triggers, introducing blocky sell events rather than continuous pressure.

A brief tokenomics parallel: products that design predictable liquidity and disciplined sell mechanics can reduce destabilizing sell-pressure in adjacent markets. For example, some token models use fixed-price entry and short, managed holding cycles to create clearer timing and reduced immediate sell incentives, an architectural principle that can be instructive when thinking about collateralized positions.

Source: https://candysdirt.com/2025/12/12/have-bitcoin-now-you-can-finance-a-home-with-cryptocurrency-mortgage-lender-milo/