Does owning crypto hurt my loan approval?

ego22 on 08/08/2021 - 20:24

Me and my partner just put in an offer for our first home today and our offer got accepted. We already have pre-approval and now we have to go back to the bank so they can go through our spending and accounts with a fine tooth comb. We have no debts at all, no credit cards, no real assets apart from one car and (as of right now) $62k in crypto. We dont make that much money, our deposit is 63k, the house we are buying is $495k, but we got approved to find a house up to 530k…
i just wanted to know if the banks find people who own crypto as…well, basically idiots. And crypto its all just a childish gamble and not a real asset. Would them knowing that i own that much in crypto damage or help our chances of getting approved?

Also for anyone who knows a bit about crypto. How do I show the bank that I own that much when all my 'coins' are in seperate wallets and not on an exchange?

Financial Cryptocurrency

Comments

  • robbyjones on 08/08/2021 - 20:26
    +13

    Crypto is so volatile I doubt they would consider it in your assets unless you realised it all prior to applying.

  • garetz on 08/08/2021 - 20:31
    +4

    Banks consider crypto currency as worthless, they will not use it as an asset so probably best not to mention it at all.

    • techlead on 09/08/2021 - 10:48
      -1

      Nope, banks do consider them as assets, they may apply a discount to its value to account for the "volatility".

      I'm going through pre-approval now. I don't need a mortgage but if I can borrow someone else's funds at such low rates, why not? I can get at least 10% returns elsewhere, so its an arbitrage opportunity.

      • p1 ama on 09/08/2021 - 10:55
        +1

        I don't need a mortgage but if I can borrow someone else's funds at such low rates, why not? I can get at least 10% returns elsewhere, so its an arbitrage opportunity.

        It's not an arbitrage opportunity, it's just leverage…

        • rektrading on 09/08/2021 - 11:49

          It can be an arbitrage opportunity if one have the right knowledge.

          Techlead could take asset A and mint asset B that is pegged to a fiat, convert asset B to fiat, use fiat to buy the property outright, pay back fiat with income from work, covert fiat back to B, burn B to get back A. Done.

          Techlead now owns a property, still have asset A and paid zero interest.

          • p1 ama on 09/08/2021 - 13:15
            +1

            @rektrading:

            Techlead could take asset A and mint asset B that is pegged to a fiat, convert asset B to fiat, use fiat to buy the property outright, pay back fiat with income from work, covert fiat back to B, burn B to get back A. Done.

            That's not an arbitrage because it's not risk free - you're using income from work to pay back the fiat. If you lose your job or everything goes to shits and you don't have the income to service, then the entire plan is dead.

            • rektrading on 09/08/2021 - 14:03

              @p1 ama: I left out one step where Techlead earns interest when minting asset B. That is a perpetual income until asset B is burned. There are also more complex structures where assets can be folded to increase APY.

  • dust on 08/08/2021 - 20:32
    +3

    The amount you can borrow is almost entirely driven by your earnings (combined salary, etc). I don't think owning crypto would affect the amount you can borrow.

    • Extreme on 09/08/2021 - 08:03

      Deposit size also plays a part.

      • techlead on 09/08/2021 - 10:37
        -1

        You can derive income from crypto. For example, the income I'm getting from mining and DeFi (decentralised finance) is multiples above my full time job.

        • idjces on 09/08/2021 - 18:19
          +1

          But what bank would accept crypto derived income on your application for finance?

          They don't even like recording dividends from my S&P index funds

  • SF3 on 08/08/2021 - 20:35

    Generally, Unless you are shorting it or has some risk where you could owe more than what you put in, that would be a risk to a bank. Or money was borrowed to buy it.

    Otherwise it’ll be like buying something random for $62k and it’s value may not be worth much in the future.

    • techlead on 09/08/2021 - 10:40
      -1

      not be worth much in the future

      Based on what? The market says no to that statement. Bitcoin was $12000 USD a year ago, today its worth $43400USD. Not sure what you mean by "not worth much". That's a nearly 4x in value, if that's not worth much, what is? Which investment property has increased in value by 4 times since last year?

      • idjces on 09/08/2021 - 18:30

        The only thing that matters is how confident a bank can be in liquidating the asset, or maintaining the income stream.

        Bitcoin has only held this value for the past 6-12 months of it's 13 year history. How can the bank be confident that when the economy falls apart, they can liquidate the assets and get most of the funds, or that any income streams will remain stable.

        Any person's, or the market's expectations on future value, really don't factor into the situation

        • rektrading on 09/08/2021 - 19:07

          Digital assets are the most liquid market in the world. It operates 24/7 365 days over all continents. It's impossible to not find buyer at a moment's notice.

          It biggest asset by Mcap has held its value pretty well since 2009 with a gain of 38557772% according to the BLX chart.
          https://files.ozbargain.com.au/upload/393946/90105/screensho…

          • idjces on 09/08/2021 - 19:12

            @rektrading: I guess my comment needs clarification. The only thing that matters, is that when the time comes, how confident can a bank be in selling off the asset in a distressed market, to help recover the loan and minimize the bank's losses.

            • techlead on 09/08/2021 - 19:18

              @idjces: Selling any asset into a distressed market will lead to haircuts. Look at the covid dip in stocks, some stocks were more than 80% down.

              The crypto market has matured to a stage where I can actually sell the weekly interest payments to sustain my lifestyle.

              • idjces on 09/08/2021 - 19:25

                @techlead: As much as I agree with your comments regarding crypto, these have nothing to do with the thread topic, that is how a traditional bank would handle credit assessments and how they would assess a 'volatile asset'

                • techlead on 09/08/2021 - 19:32

                  @idjces: I'm having the same argument with the bank, I can prove that I have been consistently getting some cashflow (actual fiat) from it. They seem to be receptive, but need to be escalated up the chain.

                  I just want to borrow as much as I can, looking to borrow $5-7 mil. I can buy it outright if they peeve me off too much. My preference is to borrow from the bank and save as much of my crypto as possible. Don't want to sell just yet.

                  • idjces on 09/08/2021 - 19:37

                    @techlead: Same problem here. They seemed to have tightened their requirements the last few years. I have issues getting them to assess stocks/etf's, I don't even try and tell them about crypto

                    I hear small business owner's/sole proprietor's get thrown through all sorts of loops trying to prove their income.

                    I imagine crypto ranks even 'riskier' than the small business guys haha

                • rektrading on 09/08/2021 - 19:46

                  @idjces: Why go to a traditional bank and get ripped off?

                  Do like Rob instead. A $100000s loan at 1% interest in less than 24 hours.

                  BUYING AN INVESTMENT PROPERTY WITH CRYPTO (BE CAREFUL!)
                  https://youtu.be/2zjr4SuxmdA?t=474

                  • idjces on 09/08/2021 - 19:54

                    @rektrading: There's certainly a lot of options. Unfortunately, there's few good choices of lenders that will take on a house as collateral.

                    I think the defi loans I've used work out to about 2% p.a, but with decently higher LTV ratio's (and other various trade-offs factoring into it)

  • Soluble on 08/08/2021 - 20:37
    +8

    You don't show the bank you have crypto holdings, that's the point of crypto… F**k the bank.

    • Crow K on 08/08/2021 - 20:57
      +8

      "F**k them indeed! … now to get back to finishing off this mortgage paperwork and signing a 20+ year contract with them to fund the largest investment of my life"

      • Soluble on 08/08/2021 - 21:38

        Use them when you need to…

  • serpserpserp on 08/08/2021 - 20:38
    -3

    Banks consider crypto worse than you saying you have 10k in your Sportsbet account. At least they know with your Sportsbet account that you'll probably keep the balance higher for longer.

    • techlead on 09/08/2021 - 10:40
      +1

      Have fun staying poor. :D

  • Mechz on 08/08/2021 - 20:49

    Set a sell point and a stop loss then wait for it to hit and pump that cash into your mortgage.

  • ULT on 08/08/2021 - 20:55
    +5

    when i had to get my home loan approved, they considered Crypto as an "other asset" and it will not increase your Purchasing Power, especially if you disclose it as crypto. You dont need to "prove" you have/do not have the crypto as they don't care. My Bank consultant was actually impressed I dabbled with BTC and altcoins, contrary to common belief that everyone in crypto must be crazy.

    TLDR: owning crypto doesnt hurt your position with the bank but it doesnt make it better either, as long as you didnt borrow the money to invest in crypto and its your own cash to lose/gain from. they care more that you have a stable income (for at least 6months) and your credit score is in good standing. if you want to increase your chances with bank you could sell some crypto into fiat but thats your call, you're already pre approved for over the amount of your offer so you will be ok.

  • freefall101 on 08/08/2021 - 20:57

    Unless you declared it an asset to secure the loan, the worst that can happen is it drops to $0 in value.

    If you did say you had $62k in cash/investments and didn't say it's crypto, probably best to convert it to cash sometime soon (or an ETF or something).

  • netjock on 08/08/2021 - 21:08
    +3

    Nobody cares except for the ATO.

  • conan2000 on 08/08/2021 - 21:11

    Is your deposit $63k including the crypto? Or do you have the deposit in cash+the crypto? I wouldn't be holding my deposit in Crypto due to the volatility, and that would be the biggest risk factor with the bank assessment of your situation.

    I haven't bothered declaring my crypto as an asset with finance, but I only have just over $2k all from mining the last few months, so it's immaterial anyway.

    • ego22 on 08/08/2021 - 23:57
      +1

      No not including the crypto. 63k cash and 62k in crypto.

  • JimmyF on 08/08/2021 - 21:27

    and (as of right now) $62k in crypto. We dont make that much money, our deposit is 63k,

    Does that crypto make up part of the $63k deposit?

    • ego22 on 08/08/2021 - 23:56

      No. crypto and deposit are seperate. Just happen to be almost the same

      • JimmyF on 09/08/2021 - 00:21

        Then no issues at all, assuming the $63k deposit you have covers what you need to cover etc.

  • Adrian Player on 08/08/2021 - 21:31

    Banks definitely """"do not"""" accept crypto for funds to complete on a mortgage.

  • rektrading on 08/08/2021 - 21:40
    +4

    Any banks or financial institutions to haven't made plans to offer digital assets services will be Blockbustered.

    650 U.S. Community Banks Can Now Offer Crypto Services
    https://www.nasdaq.com/articles/650-u.s.-community-banks-can…

    Germany plans to allow certain institutional funds to invest billions of dollars in crypto assets for the first time. A law taking effect on Monday will let so-called Spezialfonds with fixed investment rules put as much as 20% of their holdings in Bitcoin and other crypto assets. The funds, which can only be accessed by institutional investors such as pension companies and insurers, currently manage about 1.8 trillion euros ($2.1 trillion).
    https://www.bloombergquint.com/politics/germany-to-allow-ins…

    Basler Kantonalbank (BKB), Switzerland’s eighth-largest bank, is getting into crypto through its subsidiary, Bank Cler. Owned by the Swiss Canton of Basel-City, BKB has total assets of approximately $49 billion.
    https://news.bitcoin.com/government-swiss-bank-crypto-tradin…

    People that want to use their digital assets to buy real estate can boost their deposit by using a lending platform. Drop $250k in a lending platform and take out a $200k loan at 1% interest. Drop the $200k in the bank account and file the mortgage application.

    $62k in digital assets in this case is an extra $49k in cash. This takes the total deposit to $112k.

    BTW. People should never disclose their digital asset hodling or their wallet addresses to anyone. Cryptocurrency was born from the rubble of the GFC. It was designed to be transparent but anonymous.

    • dust on 08/08/2021 - 22:26
      -3

      BTW. People should never disclose their digital asset hodling or their wallet addresses to anyone. Cryptocurrency was born from the rubble of the GFC. It was designed to be transparent but anonymous.

      But what if I have $45 million USD in crypto and I want to help others to achieve financial freedom?

      • techlead on 09/08/2021 - 10:43

        Don't try to imitate someone else.

        • dust on 09/08/2021 - 10:45

          Maybe I shouldn't have left the /s off.

    • BigBirdy on 09/08/2021 - 10:00

      total deposit to $112k

      Yes, a bigger deposit, but made up of a $49k unsecured (as far as the bank is concerned) loan. That will not help a loan application. Cashing in the crypto would help.

      • rektrading on 09/08/2021 - 11:30

        Australian banks should keep up with technology.

        The loan is collateralized by digital assets. This allows more assets to be tokenized and used as collateral in the financial world. Banks that want to survive will adopt this technology while those that prefer VHS will get what they deserve.

        The EIB spearheads market developments in the digitalisation of capital markets
        The EUR 100m 2-year bond, placed with key market investors, represents the market’s first multi‑dealer led, primary issuance of digitally native tokens using public blockchain technology
        https://www.eib.org/en/press/all/2021-141-european-investmen…

        The world's first real estate NFT just got sold — why this is revolutionary
        https://www.laptopmag.com/news/the-worlds-first-real-estate-…

        Cashing in the best performing asset class to get a loan is bad financial management and may trigger tax liabilities depending on one's tax residency.

  • Choc0 on 08/08/2021 - 22:29

    Don't tell the bank about your crypto.

    You know what it's worth, but the bank has no respect for it. So why disclose it?

  • Mokr on 08/08/2021 - 22:54

    damn you had 120k in cypto

    • techlead on 09/08/2021 - 10:43
      -3

      It will be 250k by the end of the year. As long as you don't sell, you've lost nothing.

      • Mokr on 10/08/2021 - 10:11

        need china to get back into the market, i think china might have their own coin/internet.

        fun times

        • techlead on 10/08/2021 - 10:19

          Crypto don't need China. Its actually a very good thing that China has banned mining, it was one of the risks to crypto, it was starting to be more centralised.

      • techlead on 10/08/2021 - 10:19

        Downvote all you like, the market is upvoting me and that's what counts. :D

  • rambao9 on 09/08/2021 - 00:57

    Last time I applied, Crypto is part of your savings and they can value it as per the price at the time of application.

    The people in the back that approve home loans are also just humans and most of them probably have invested in crypto.

    In conclusion, no it doesn't but I can imagine if there was a huge dip just before settlement, it may affect your borrowing capacity.

  • p1 ama on 09/08/2021 - 01:08
    +4

    now we have to go back to the bank so they can go through our spending and accounts with a fine tooth comb

    As someone who used to work in the industry, I have no idea why this view persists. If your bank is asking you a heap of questions about your spending habits, they're just doing it to tick APRA's requirements. If you find that annoying, find an NBFI who aren't subject to the same level of stringent requirements as the big 4 banks are and they'll usually pretty much ask you nothing.

    As for your spending and accounts, as long as you have enough money for your deposit, you consistently make as much as you say you are and there's nothing suspicious, you're fine.

    In case you want to know what the process "behind the scenes" is - once you send in your documents, they'll be sent to some junior dude in the credit team, who's going to put all of your numbers into the computer, and press some buttons. The file will then be sent to some mid-level credit dude to review (and by review, I just mean glance over it for 2 mins), press some more buttons, the computer will make its decision, your credit papers are generated and you're good to go.

    The total amount of time the bank spends on you is probably around 10 mins.

    In regards to your cryptocurrency investments, the bank will not care, just like they will not care if you own 3 cows and 4 goats, or if you own a $60K stake in your friend's dog grooming business. Unless you are saying that you intend to liquidate said assets to meet your deposit requirements, nobody cares.

    i just wanted to know if the banks find people who own crypto as…well, basically idiots. And crypto its all just a childish gamble and not a real asset. Would them knowing that i own that much in crypto damage or help our chances of getting approved?

    It won't matter - there's no dude sitting there thinking "hmmmm, is ego22 an idiot or not" - all your details are just fed into a computer, some output is spit out and that's that. Human credit decisioning is something you might find in an insto bank, definitely not in retail.

  • jimbobaus on 09/08/2021 - 02:05

    Most of the big banks see money spent on Crypto as "discretionary spending"
    Having a high level of DS can negatively effect your loan approval.

    When we got our recent loan our banker discussed cryptp with us and said that they have seen it more and more and when combined with large amounts of other DS it can push you into decline territory.

    provided you do not have a lot of DS then your crypto holdings should not negatively effect your loan approval.

    Examples of DS: Gym Memberships, Pet Insurance Premiums, Uber, Menulog and so on.

    On a side note, which bank did you go with for your pre-approval? when we did ours all the hoop jumping happened up front, when we put offer info a home the process was painless and quick as all the checks and balances were done up front.

  • techlead on 09/08/2021 - 10:47
    -2

    Your crypto can fund your entire house easily within this bull cycle, then you don't even need a mortgage haha.

  • techlead on 09/08/2021 - 10:56
    -2

    The people who say Bitcoin is "worthless", do you even know what Bitcoin is? Just curious how much they actually know about it. Have you just been reading media articles from journalists who also don't have the tiny clue about what Bitcoin is. Do some independent research.

    Bitcoin has been the best asset to own for the last decade. This is a fact, its not opinion, its right there in the numbers. And this sector is just getting started.

    Not financial advice, but my 2 cents would be, keep as much crypto as you can for 10/20 years and you'd be very happy.

    • TEER3X on 09/08/2021 - 20:06

      Bitcoin is yesterday's news. Ethereum has a much brighter future

      • techlead on 09/08/2021 - 21:38

        Very true, I totally agree with you. I personally has been buying Ethereum more than Bitcoin over the last 2 months, but for newbies, they've only ever heard of Bitcoin. So I usually talk about it more.

        Bitcoin is also the most valuable chain and is less volatile than Ethereum. Its also easier to understand, so its a good place to start.

  • LordNiksidor on 09/08/2021 - 10:58

    Ubank (nab) didn't want to consider my shares as part of the means test as "they're to volatile" even though they were more than the value of the loan I was applying for… So they missed out on a loan and I went with NPBS instead. Classic

    • techlead on 09/08/2021 - 10:59

      I guess it depends on what shares. Are they penny stocks or blue chip?

  • 7Alice7 on 09/08/2021 - 13:06

    They probably don't need to know unless you are DCA and it shows in your budget. Do however consider whether now is a good time to convert your crypto to fiat. Fires are burning in the background (Tether, Binance etc) and many believe a significant correction is due.

    • popsiee on 09/08/2021 - 13:12

      All depends on whether 1 man ( of course has build positions ) wants to tweet something which direction crypto will go lol .

      • 7Alice7 on 09/08/2021 - 14:06

        Elon is just a puppet to bring in the dumb money.

    • techlead on 09/08/2021 - 14:28

      There's been many fires before, Mt Gox, various exchange hacks, China mining ban, China ban fud etc etc.

      I've been hodling since 2013, will continue to.

  • demiurge on 09/08/2021 - 15:31

    How would they even know you have crypto?

    • techlead on 09/08/2021 - 21:39

      They can see it in their bank statement. There will be transactions to an exchange, if it was purchased in the last 3 months.

  • TEER3X on 09/08/2021 - 20:05
    +2

    $62k in crypto now is worth $80k in 10 days, then $45k in days after that. Just my prediction.

  • OzHunterNSW on 10/08/2021 - 10:38

    Possibly gramma is letting you down. They notice these things

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