I have an Australian based client who wishes to purchase a residential property as an investment, borrowing 80% LVR on the property (to avoid the cost of mortgage insurance) and borrowing against his gold holdings for the remaining 20% (instead of cashing in his gold to fund the 20% gap).
I have done some research already which consisted of:
- Asking my finance broker to ring around their financing partners.
- Spoken to lending managers at Arab Bank and the Bank of China.
- JP Morgan (for a laugh if nothing else)
So far I have failed to find any lender that would entertain such request. I also asked on my own behalf "could I borrow some money to buy physical Gold or Silver, using the purchased metal as a security?" Again no takers.
Actually is was a fun exercise pointing out to the lenders that they are willing to lend money on a new car, using said car as the security in the full knowledge that the moment the car is driven out of the showroom the loan is underwater and the security will continue to decrease in value forever. Yet they won't lend me money to purchase an asset that has been increasing in value by 10 - 15% pa for the last ten years as it too "risky" to use as a security.
These conversations were particularly funny when speaking to the Arab Bank loan officer at a branch in a predominately middle eastern suburb of Sydney, they said "no we don't accept gold as collateral", when almost every person walking past their branch owns some gold - mindless. The Bank of China was equally useless, I asked the loan manager "gee if a Chinaman won't take my gold as a security what hope I have got of finding anyone who will?" he responded "not much mate".
Does anyone know of a lender in Australia who will lend money using physical Gold or Silver (not an ETF) as full or part security?
I would also like to hear from anyone who knows of such practices outside of Australia, such as Turkey and India.
To answer please leave a comment below. This can be done anonymously.
Thanks in advance.