Using Precious Metal (mainly Silver) as collateral for a home loan

As far as I understand, Banks can only use fiat money as a means for a loan (and payment).

It is on your signature that the money is generated (actually transferred, not loaned as you may think) less 10% as per fractional reserve banking.
The account (T ledger - double entry bookkeeping that you never see) is zeroed out that evening via the central bank where all accounts must balance as per banking rules.
The debt is extinguished that evening; from there it is money for the banks.

Gold/Silver being real money does not fit into this game at this point in time.

I would imagine if you offered real gold/silver, the banking staff would not have any idea what to do and would freak out at the prospect for being personally liable for such a transaction.
 
Macros_The_Black said:
hiho said:
Heres an idea I have been mulling over for a while.

Approach the seller and offer your metals as a side payment and get them to reduce the selling price by same amount?

You would borrow less and pay less in stamp duty too, your deposit would also become a greater % of the loan, therefore possibly eliminating mortgage insurance?
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Good creative thinking - apart from the other issues mentioned above, there would be an implied CGT issue for the future - ie if your selling price is lower, you will have automatically incurred a larger potential CGT liability (when it comes time to sell, if that ever happens).

Perhaps GP will look after it for you and re-hypothecate?? :p ... Or JP Morgan ...
Click to expand...
From memory the CGT implications only matter if the buyer plans it to be or class it as an investment property. If seller classes it as an investment property then they may well be v. interested.
 
The banks can barely handle cash, let alone real money. The staff almost exclusively deal in digital credit/debit, no wonder they freak out if you mention metals.

Wasn't that long ago you could actually buy real estate using cash. If you tried that today there's a good chance they'd call the police and have you arrested.
 
Remind me of the Hunt Brothers :)
By the way guys, i just gone to the commonwealth bank and did an evaluation test to see how much i can borrow, they confirm that we can use precious metal as collateral to get a home loan. Why I ask this because i have shortage of cash and mostly in PM. I do not want to sell ALL my PM in order to prove i have to cash for down payment. Because i have not make up my mind to really buy this property or not.So selling my PM now and rebuy it later just to get the loan approval seems kind of silly.

Once i get the actual loan approval document tomorrow. i am 100% confident you can do that.
Will inform you guys tomorrow.

Now i need to dig up my receipts to prove how many ounce i brought.
Remember keep your receipts.:)
 
longtime silver believer said:
I don't want to use silver as collateral, just want to buy a house with 100kg's of the stuff! One day,one day.
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Well before citizens would have the freedom to freely trade in such a manner they would first have to rid themselves of the coercive guvmint which they keep electing.

otherwise no can do...
 
Cinvalo said:
By the way guys, i just gone to the commonwealth bank and did an evaluation test to see how much i can borrow, they confirm that we can use precious metal as collateral to get a home loan.
Click to expand...

Seriously?

Please let us know you you go.
 
hiho said:
errol43 said:
hiho said:
Heres an idea I have been mulling over for a while.

Approach the seller and offer your metals as a side payment and get them to reduce the selling price by same amount?

You would borrow less and pay less in stamp duty too, your deposit would also become a greater % of the loan, therefore possibly eliminating mortgage insurance?
Click to expand...

How much deposit do you have to have to eliminate mortgage protection? My son will be in the market late next year and he was talking about this recently, how to eliminate mortgage protection costs.

Would appreciate an answer from SS members.

Thanks hiho for your post!

Regards Errol 43
Click to expand...

Errol, it's 20% of the purchase price usually. So $300 000 property you would have to stump up $60 000 without allowing for all the other fees

PS: Its a turtle-heading rort too, you pay for the banks insurance :angry:
Click to expand...

Does anyone know whether any other countries have a consumer-shafting system like our mortgage insurance? or is it uniquely Australian?

The other day i was looking to change my mortgage loan type to a different type of loan (same amount - just transferring to different loan) and the banksters wanted to charge me mortgage insurance again for it because i didn't have 20% equity..
Can you believe it??

Same mortgage - just moving between loans - still protected by same mortgage agreement I had signed a few years back, but apparently the system does not even port the MI under the same mortgage from one loan to another.

Of course this is the biggest hindrance to real mortgage competition in Australia - the lack of portability of mortgage insurance ...
so basically if you have less than 20% equity in your home you are a captive client with your bank - which explains why Ozzie banks show customers the finger each time there's an interest rate reduction.

I'd be very surprised if any other countries have such a roadblock to banking competition as we have here in the form of mortgage insurance.
It''s got to be the dumbest system on earth
 
Slightly off topic

In the UK it is called PPI (Payment Protection Insurance). It is used for mortgages, loans and credit cards. Recent legal action against UK Banks and Financial Institutions have deemed almost all PPI as mis-sold to customers.

http://www.fsa.gov.uk/consumerinfor.../payment_protection_insurance_/claim-back-ppi

When I was living in the UK I had PPI on a credit card from 2002-2006. A couple of months ago I followed the instructions on the UK Ombudsman website, completed the form, sent it to my old credit card company, took about 1/2 an hour to complete. About a month later I received a letter and a cheque. Full refund plus interest for the whole amount I had paid from 2002-2006.

I'm no legal expert, but basically the courts found that if you were employed and received paid sick leave as part of your contract, had your own savings, other employment or disability insurance, a redundancy agreement, or other means of making repayments to your loans then the bank or financial institution mis-sold the PPI to you. In my case most of the above was true, but I was also told at the time of taking out the credit card that I could not have the credit card unless I paid PPI, this was also deemed mis-sold by the courts.

If the masses can take the banks and financial institutions on in the UK, why can't the Aussies? I seem to re-call a class action suit against ANZ recently in regards to unfair bank fees, so hopefully something will come of it yet?

I don't have a credit card or any debt in Australia and never intend to. As many have said this insurance is a rort.

Interesting thread, thanks for the posts. Keen to see the update from Cinvalo
 
Cinvalo said:
Remind me of the Hunt Brothers :)
By the way guys, i just gone to the commonwealth bank and did an evaluation test to see how much i can borrow, they confirm that we can use precious metal as collateral to get a home loan. Why I ask this because i have shortage of cash and mostly in PM. I do not want to sell ALL my PM in order to prove i have to cash for down payment. Because i have not make up my mind to really buy this property or not.So selling my PM now and rebuy it later just to get the loan approval seems kind of silly.

Once i get the actual loan approval document tomorrow. i am 100% confident you can do that.
Will inform you guys tomorrow.

Now i need to dig up my receipts to prove how many ounce i brought.
Remember keep your receipts.:)
Click to expand...

Thats great Cinvalo, I have thought about this topic before.

I'm thinking you would have to show reciepts to show how much you have bought, but what if you have sold some and still showed reciepts? The same could go for bringing in actual bullion, who says you diodn't just borrow part or all of it from a friend? The same could be said with reciepts in your name and borrowed bullion. I could see why banks could be dubious (if they don't hold it thet don't own it :lol: ).

Just throwing an alternative view in there.

I actually looked up what makes up a credit rating or credit report as it's called here in Aus, recently as I got knocked back on a credit card. I was surprised that I had made some pretty bad mistakes which affect it and not late payments on bills or previous loans. My bank has pre approved me for a card with a 70% larger limit but will I will order a credit report before I make any more applications.
 
Big A.D. said:
Cinvalo said:
By the way guys, i just gone to the commonwealth bank and did an evaluation test to see how much i can borrow, they confirm that we can use precious metal as collateral to get a home loan.
Click to expand...

Seriously?

Please let us know you you go.
Click to expand...
yes let us know ... If its true your blessed by the loan gods. I dont believe it . As bigad said what if you sell the PMs ? & how do they know you actually have them .Reciepts is not proof . Do they want to hold them as surety ?
 
Not used as collateral but I offered mine as to the ANZ as part of the deposit and a way of avoiding the hassle of selling the metal with all the negotiating, postage and dealing with buyers. No deal. They weren't interested and thus i sold most here to stump up the deposit.

I suppose houses as collateral are seen as less volatile in price, albiet rather subjective.
 
Naphthalene Man said:
Not used as collateral but I offered mine as to the ANZ as part of the deposit and a way of avoiding the hassle of selling the metal with all the negotiating, postage and dealing with buyers. No deal. They weren't interested and thus i sold most here to stump up the deposit.

I suppose houses as collateral are seen as less volatile in price, albiet rather subjective.
Click to expand...
I dont think its because theyre less volatile in price its because they can put a lien on it & you cant sell it until the lien is paid & if you do they get their money first & you get whats left. Just like cars on finance they go on the encumbered vehicle register so when its sold the finance company gets paid first .(im assuming everybody does a REVS check before buying .You would be an idiot not to )
 
capt.sparrow said:
hiho said:
errol43 said:
How much deposit do you have to have to eliminate mortgage protection? My son will be in the market late next year and he was talking about this recently, how to eliminate mortgage protection costs.

Would appreciate an answer from SS members.

Thanks hiho for your post!

Regards Errol 43
Click to expand...

Errol, it's 20% of the purchase price usually. So $300 000 property you would have to stump up $60 000 without allowing for all the other fees

PS: Its a turtle-heading rort too, you pay for the banks insurance :angry:
Click to expand...

Does anyone know whether any other countries have a consumer-shafting system like our mortgage insurance? or is it uniquely Australian?

The other day i was looking to change my mortgage loan type to a different type of loan (same amount - just transferring to different loan) and the banksters wanted to charge me mortgage insurance again for it because i didn't have 20% equity..
Can you believe it??

Same mortgage - just moving between loans - still protected by same mortgage agreement I had signed a few years back, but apparently the system does not even port the MI under the same mortgage from one loan to another.

Of course this is the biggest hindrance to real mortgage competition in Australia - the lack of portability of mortgage insurance ...
so basically if you have less than 20% equity in your home you are a captive client with your bank - which explains why Ozzie banks show customers the finger each time there's an interest rate reduction.

I'd be very surprised if any other countries have such a roadblock to banking competition as we have here in the form of mortgage insurance.
It''s got to be the dumbest system on earth
Click to expand...

You know MI is an insurance product and as such yo can cancel the policy and recieve a refund on the unused portion like any other insurance product.
 
Many years ago when I was working in the home loans industry, to my understanding mortgage insurance is still required for an LVR (Loan to Value Ratio) of up to 60% the difference is a deposit between 20%-40% the bank pays the MI (I am positively sure they will massage the MI into the loan) while a deposit under 20% the client pays as part of their borrowings.

I can also confirm back in those days that switching home loan products even with the same bank, they will slug ya again for mortgage insurance, loan application fees, loan stamp duties, and if the loan is less than 5 years a minimum payment of 3 months as a penalty for early termination of contract. I remember one client who paid he's home loan really quickly then asked me if he paid off the home loan early he had to pay the early termination penalty so he left the home loan with an outstanding balance of $500 just so he didnt have to pay the 3 months penalty.

That can be an additional $10k in fees just for switching, so bye bye equity. Lets not also forget your new loan has been reset back to 25 years. 25 Years was the maximum back then. The schedule of fees (rorting the client) may have changed now.

Lesson learnt here is to thoroughly read your loan contract agreement. Yes I know 25 pages of fine print can be a head **** but thats the lawyers job of making that contract so ambiguous that the client just ends up signing the contract without reading anyways. On most cases you can negotiate the loan contract agreement and have it amended to suit you, its just another sale to the bank with terms and conditions which is the best way to look at it.

To the OP, think the reason why CBA allowed you to use PM is to show that you have either savings or an asset and will be used to assess your credit which i believe is now all computerised. I still do not believe that they can securitise a loan against PM's or savings (maybe locked term deposits), unlike a car, boat or home which have paper titles and can easily be repossessed through the court system.
 
Banks today lend something like 80% of their funds (ie loans in existence) backed by property. Pretty much if you dont have property, you can forget about getting any kind of largish loan (say over $100k).

Back in 2005 I had about $100k in a managed fund and $20k in cash and wanted pre-approval for a $300k house loan.

No dice, they said I had to sell the shares held in the managed fund, then I would be approved for the loan.
 
I've used gold as a bond on a rental :) got my ounce back after the end of lease too :D Landlord/mate started stacking after he returned it.
 
Matthew 26:14 said:
Banks today lend something like 80% of their funds (ie loans in existence) backed by property. Pretty much if you dont have property, you can forget about getting any kind of largish loan (say over $100k).

Back in 2005 I had about $100k in a managed fund and $20k in cash and wanted pre-approval for a $300k house loan.

No dice, they said I had to sell the shares held in the managed fund, then I would be approved for the loan.
Click to expand...

WHile we wait for Cinvalo to reply, Matt has made a good point.

To reduce their exposure to market volatility, some more conservative banks will only lend:

80% against a residential property
70% against units

only 50% against shares (usually blue chips only) or taxi plates.

My educated guess would be that CINVALO would at most only be given 50% (or likely less) of the current market value of his silver. That's if the person making the decision has a clue and is so inclined to take on the business. So if for example Cinvalo has $10k in silver, the bank will accept this as a $5k deposit.


This is the bank's way of protecting itself from bad debt. Unfortunately most banks do not operate that way but lend out much more than people can afford.
 
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