Borrowing Additional Money on Home Loan to Purchase Bitcoin. Need Advice

LNyclix on 27/02/2021 - 09:50
Last edited 02/03/2021 - 15:43 by 1 other user

Hi everyone.

Last July I purchased a property off the plan for 530k in Canberra. It's a 3 bedroom 2 bathroom 2 garage seperate title townhouse. I negotiated a few good additions for free ( ducted to entire house as opposed to one aircon unit, caeser stone bench top) which should help add to the value. The house is due for completion in April and house prices seem to have gone up a fair bit in Canberra since then so I'm thinking it could come back evaluated 570-580k.

Now I've been wanting to purchase Bitcoin again for a while. I've been in it previously but I sold at a loss as my mortgage broker said I needed 20% to get pre-approved ( I had around 13%) I didn't want to sell but I did in order to get it. Needless to say it's gone up dramatically since then and I'm kicking myself about it. It's my own fault as I didn't reach out to other banks for their advice which it turns out I'd have been fine on 10-12% and pay LMI.

My question is would it be ridiculous of me to use the equity I have in the home and borrow more from my bank in order to purchase 30-45k of Bitcoin since the bank will loan me 20% of the evaluated value. Interests are incredibly low at the moment and I could see myself getting ahead more by utilising this low loan rate and banking on Bitcoin.

Once I move in I'll receive 25k from the government from their building stimulus scheme which will go towards purchasing some appliances and furniture. I should have around 10k spare.

I'm currently on just under 60k a year, clearing $950 a week after tax. If I proceed as planned borrowing 80% which is 424k my repayments will be around $365 a week on a 3 year fixed term leaving me $585 a week to live on.

If I was to borrow an additional 40k to throw into Bitcoin( 80% of 580k) my repayments would go up to $400 a week, leaving me $550 a week to live on. The house is 7.8 energy stars with 2.2kw solar so I don't imagine my utilities will be too much.

I'm a big believer in Bitcoin and could see it hitting 200k by the end of year. I understand it could also be worth a lot less than it currently is. I'm looking to hold long term.

Is it mad that I even consider borrowing an additional 40k to throw into Bitcoin ? The other two bedrooms would be empty so if I struggled financially I could rent a room out for around $250 to help.

Another option I considered was not borrowing anymore than I needed, renting a room out and paying as much into the mortgage as I could in order to purchase a second property in a year or so. This seems the more sensible route?

I don't see myself getting ahead from working in retail alone so I'm looking at other means to get ahead in life.

I apologize for the long post and appreciate all your replies.

Cheers,

Edit: Thank you to everyone that has replied. I've decided against borrowing any additional money from the bank. I really hadn't thought the idea through and how badly it could turn out. I still believe in Bitcoin and will invest but only a small amount each month that I wouldn't lose sleep over if it went to zero.

Financial Cryptocurrency Home Loan

Comments

      • cunningdrew on 02/03/2021 - 11:24

        Have you checked performance of late? ADA Cardano is not following the BTC chart, or other coins for that matter.

    • netjock on 28/02/2021 - 15:02

      Who is your uncle?

    • cunningdrew on 02/03/2021 - 11:23

      Your uncle is right.

  • The tiger on 28/02/2021 - 14:44
    +1

    Danger, danger. The price of Bitcoin is too high now and so the investment is correspondingly risky. There is no physical features with Bitcoin. No one is responsible for a good management and control of its real existence, very much unlike others such as realestate, minerals, gold, gas , oil, and listed companies such as Coles , Woolworths , and banks. Greedy usually ends in disaster.Well unless you have plenty of black money and you want to laundry them pure which is another story.

    • netjock on 28/02/2021 - 15:01

      You mean there is no helpdesk if you lose your credentials and want to access it? For $50k I'd expect better service.

  • netjock on 28/02/2021 - 15:00

    Borrow against the house but remember to offer us a chance at your house when you need to sell.

    You know things aren't going to end well when people are asking strangers if they should basically sell their house and put it into an "investment" (quotation marks because other people call it that).

  • shangoz on 28/02/2021 - 15:30

    Well, first congratulation for invest in Canberra which is a few lucky space this time still increase value, second, Canberra in Autumn and Winter plus Early Spring just bit too cold, you need a heater constant in hand and pay heavy heating cost, SO, why not build up a good Rig to mine Bitcoin and Ethereum and the Heat enough to keep your new house warm, this way you will reduce the risk invest to cryptco to minimum, in Tax turn of view, just buy and sell the profit need to pay nearly 40% capital gain tax, and the risk of lost all invest too high too cover, but as a mining machine is different, all income from mining you need to pay tax of course, but purchase equipment plus electricity and internet etc can be deductible, anyway, ask your account what thing can be deduct and what thing need to pay capital tax before the risk movement.

    • Nyclix on 28/02/2021 - 15:43

      I've got one gaming PC with a rtx 3080 and one with a 1080ti. Since I've got 2.2kw solar I've considered mining actually haha.

  • ProlapsedHeinous on 28/02/2021 - 16:10
    +1

    I think a better strategy is to buy smaller regular amounts, but also look at other investments. don't put all your eggs in one basket. Also look at altcoins, with a view of a longer term hold. The crypto scene is still tiny. Time in the market beats timing the market.

  • plmko on 28/02/2021 - 17:11
    +3

    Risk/rewards is pathetic for BTC at these levels, only worth while for large hedge funds who need vehicles to deploy billions of dollars which are impossible for shares due to limited float.

    How much are you willing to bet just to gain 2-3x (according to bullish price targets) when we are staring down the barrel of a bear run to $16k?

    Why bother with that when stocks like AirBnB could double based on current trend or even should we see a new bear market it drops 30% at worst.

    Like do you peeps even think about the basics lol?

    • bataleon on 28/02/2021 - 20:21

      100%. The ship for the current run has well and truly sailed.

  • TimApple on 28/02/2021 - 18:33

    Look mate I'm a Bitcoin bullish as well, but I ain't gonna borrow more for that. Don't be greedy!

  • [Deactivated] on 28/02/2021 - 19:15
    +1

    I find it astounding that someone who earns under $60k a year is going to 'throw' $40k anywhere. $40k is a lot of money. That's basically the OPs entire post tax earnings for a year. Mortgage payments on a $500k house seem like a very high percentage (an uncomfortable percentage) of someone who makes $60k a year's income.

    • Nyclix on 28/02/2021 - 19:34

      $365 a week on $950 isn't that bad for repayments but if the interest rates went up a lot I might be hurting.

      • [Deactivated] on 28/02/2021 - 19:48

        So lets say $200 on food and eating out, that's $565, then $150 on transport (petrol, running costs), $100 on phone/internet/entertainment, $100 on bills/living costs, eg gas, electric, rates, water. That's $915 a week, with you hoping rates don't go up (which they will). That provides you with $35 a week to save for repairs, a new car, clothes, etc.

        For you to even consider spending $40k on BTC with such a low income is ludicrous.

        • Nyclix on 28/02/2021 - 20:40

          You clearly spend a lot more money than I do.

  • Herbse on 28/02/2021 - 19:36

    You'll regret not getting it in 2 years time

    • Nyclix on 28/02/2021 - 19:39
      -1

      I'll still buy but I won't take a loan out for it. I'll just put in a little each month.

      • Lupin the 3rd on 28/02/2021 - 19:53

        dont buy each month, buy the dips

  • whooah1979 on 28/02/2021 - 20:06

    It's only money.

    Going all in and getting rekt is part of the game. Those who quit from the experience doesn't deserve the gains while those that learn after hitting the bottom get rewarded with 10x, 100x or 1000x.

  • bataleon on 28/02/2021 - 20:17
    +2

    A work colleague of mine drew $20k on his home loan last year and put it all into BTC. He has since sold all of of his BTC and put it into ETH and ADA. His balance is currently hovering around $105k. Not bad returns for a year (he'll still need to pay CGT obviously).

    If you look at the graphs, 10x is pretty unlikely from the current bull run. The big returns have already been made. You needed to be in it from at least November last year to make big money. Sure, you might 2x or even 3x moving forward from now, but it's a big risk. Especially when there are people sitting on 50/100x from only a few months earlier.

    Let the current cycle run it's course and get into it in a few years from now.

    • whooah1979 on 28/02/2021 - 20:38

      Your workmate can take a 6 month paid leave somewhere exotic like Mexico and sell all his assets before returning to Australia.

      • bataleon on 28/02/2021 - 21:02
        +1

        True. He's at a job that he loves though and hasn't accrued that much leave. Otherwise I daresay he'd consider doing something along those lines.

        It's funny how a few years ago the ATO didn't bat an eyelid to crypto, but they've since done a complete 180 and have got their hand well and truly in the cookie jar. They take no risk (which as we know, there is a lot of), yet all the reward.

      • Lupin the 3rd on 28/02/2021 - 21:03

        does this work as a tourist?

        • whooah1979 on 28/02/2021 - 21:17

          There are a few more conditions like permanent address, connections to Australia like family, property, etc. It would be easier for someone that is single, no family and no other assets to make the play.

    • ribze1 on 28/02/2021 - 22:17
      -3

      Luck, not skill.

      • frewer on 01/03/2021 - 17:05

        I know a dude who can make 200points on the NQ daily. Is that good enough ?

  • whooah1979 on 28/02/2021 - 20:22
    -1

    The best time to buy is when the price is on the floor. The 2nd best time to buy is in a bull market when the price is being hammered by shorters. Longers were liquidated at the end of January and they got liquidated again just before this weekend.

  • ribze1 on 28/02/2021 - 22:17

    Come back and tell us how much you lost (plus the interest on it).

  • amazonaddict on 28/02/2021 - 22:41

    This same thing happened in 2017. My wife came across a bloke who borrowed $200K putting his business in line when BTC was $15K. Sooner, it went to $19K. Tasting that he came back to borrow more but, could not get any more money. This is when I woke up and started learning what blockchain is and cryptos are. By the time I understood, played with it bit, concluded that the tech will make it faster and cheaper to use it as a fiat replacement, the crypto market collapsed. I don't know what happened to that guy who borrowed money to buy btc .

    3 years on, nothing changed in blockchain tech, other than some big companies started buying into this. Still the same proof of work concept that eats up electricity like hell and moves the blocks at snail speed. I have lost hope.

    Anyways, assuming that person kept that borrowed btc, he could now be 3-4 times richer, and I am as poor as I was. but I still have no clue why people are buying it like crazy if the decided crash it in 2017.

  • lnq on 01/03/2021 - 00:49
    +1

    Billionaires start to buy Bitcoin because they sit on too much fiat that will devaluation at rapid speed since COVID-19. The world has changed, the number 19 in the name of virus because scientists believe there will be more in the future 23 is the next virus !!!
    Bitcoin has network effects that irreplaceable like Facebook or google. There is misunderstanding that Bitcoin can be used as currency, but no it belong to asset class like gold but better more transparent and real honest asset 1=1, unlike gold you never know how many real gold vs bank issued gold certification keep in vault.

    • cloudy on 03/03/2021 - 23:03

      Hi,

      I got interested in your comments, could you explain to the network effects and how a asset that is like gold needs or has network effects?

      • whooah1979 on 03/03/2021 - 23:11

        People can read for themselves.

        https://u.today/bitcoin-price-could-tumble-to-1300-according…

        Metcalfe’s Law
        The researchers plotted the growth in Bitcoin’s price and its number of users since the currency’s inception, and they found four periods when the growth in price dramatically outstripped the growth in users. These are Bitcoin’s four well-known bubbles, which the model, backtested against past data, predicted.

        The researchers suggest that Bitcoin’s true value is much lower than its present price:

        “Our Metcalfe-based analysis indicates current support levels for the bitcoin market in the range of 22–44 billion USD, at least four times less than the current level.”

        With 17 mln Bitcoins currently in circulation, that implies a price of $1,300 to $2,600 per coin.

        https://www.forbes.com/sites/simonmoore/2021/03/01/might-met…

        Metcalf’s Law
        The core of Peterson’s argument is Metcalf’s law. It focuses on network effects. The more people on a network the more valuable it is. For example, if you were the only person on Facebook or TikTok it would not be useful. Yet, with billions of users on these services they are very useful.

        https://nydig.com/wp-content/uploads/2020/12/NYDIG-Power-of-…

        The Power of Bitcoin’s
        Network Effect
        GREG CIPOLARO ROSS STEVENS, PH.D.
        Global Head of Research Founder & Executive Chairman
        EXECUTIVE SUMMARY
        ■ Bitcoin’s improving network fundamentals, increased investor holding periods, and
        reliably diminishing new supply make it a compelling long-term investment.
        ■ Adoption of Bitcoin is at an all-time high, with the number of addresses that hold
        bitcoin now 25.6M.
        ■ Engagement is rapidly rising, with the number of unique daily active Bitcoin addresses
        approaching 900,000.
        ■ Investors are holding bitcoin for increasingly longer periods, with 63.2% of total
        supply currently held for at least 1 year.
        ■ We believe increasing holdings periods will drive future price appreciation given
        bitcoin’s fixed supply and shrinking supply growth – 88% of all bitcoins ever to exist
        have already been created, and bitcoin’s supply growth, now at only 1.3% annually, is
        on an automatic and asymptotic journey to zero.
        ■ Our valuation framework is based on Metcalfe’s Law. Supporting our hypothesis that
        bitcoin’s usefulness as a store of value is driven by its monetary network effects, we
        NOV 2020 find that Bitcoin’s valuation can be well explained by the square of its user base.

        • cloudy on 04/03/2021 - 09:58

          I read all that, it all just says it’s increasing in network effects without actually describing the network effect itself.

          I can tell you eBays network effect, more sellers selling more items mean more buyers want to look at eBay.

          Is bitcoins network effect simply more people buy bitcoin therefore bitcoin is more bought and worth more?

          • whooah1979 on 04/03/2021 - 10:07

            @cloudy: In a nutshell.

            BTC price goes up > more invest in ASIC gear > more ASIC = higher difficulty per block > higher difficulty = cost per block goes up > higher cost = higher spot price > higher spot price = more media attention > more attention = more investors > more investors = higher BTC price > 🔃.

            • cloudy on 04/03/2021 - 20:43

              @whooah1979: I get ya, so as long as BTC goes up, it's party on!!!!

              • deme on 04/03/2021 - 20:48

                @cloudy: What happens when there is no reward for miners anymore?

                • whooah1979 on 04/03/2021 - 21:15

                  @deme: Don’t worry. That won’t happen until 2140. Most of us won’t be around to see that happen.

                  • deme on 04/03/2021 - 22:20

                    @whooah1979: So basically Bitcoin is "useful" as a currency until 2140 and then?

                    • whooah1979 on 04/03/2021 - 22:33

                      @deme: WWIII.

                    • cloudy on 04/03/2021 - 22:39

                      @deme:

                      So basically Bitcoin is "useful" as a currency until 2140 and then?

                      i'd wager it wont be that useful until 2140 lol

  • fsjlkaroiejor on 01/03/2021 - 08:32
    -1

    Look into what a sharpe ratio is.

    I would suggest to ignore the "casino" arguments.

    OP isn't asking "should I go 100% all in on borrowed money?" - so it comes down to a risk v. reward.

    Btc price has done incredibly well and with fixed supply and central banks printing money and governments with a funny definition of CPI … and with institutional funds flowing into btc, there is a good probability of btc being a good investment.

    Worst case: btc goes to $0. Best case? …

    Don't go all in, but if you can afford taking a risk with infinite upside and limited downside ….

    Lastly, ignore the "borrowing" part. You're converting an asset (house) into an asset (bitcoin). It's transactional, and the funding cost of doing this would be around 3% p.a. vs funding by leveraging bitcoin which would be 10-30%.

  • pandawelch on 01/03/2021 - 08:36
    -1

    When you see posts like this its time to get out.

    Not just you - My financially not-savvy friends starting to get into it - always a sign the bubble is about to burst

  • Jared17 on 01/03/2021 - 08:42
    +1

    US dollar is gonna crash and US would lose their hegemony position. More amd more People will want to park their money in other things like gold, property, and even bitcoins. If you can afford it definitely go for it.

  • Zondor on 01/03/2021 - 11:26
    +1

    Has to be a troll post. This is so stupid.

  • MrMoo on 01/03/2021 - 11:36

    Yer I would seriously suggest you do not do this lol.

    Having said that, scared money don't make money. So if you want to potentially ruin your mental health and future financial security in a guess because you are feeling it. You can give it a go.

  • lltravel on 01/03/2021 - 11:58
    +3

    OP i think you have made a mistake asking on this forum

    This forum is filled with people who care about saving 5 cents

    They have zero experience investing. Do your own research and ask on a forum that specializes in investing rather than saving 5 cents

    • Nyclix on 01/03/2021 - 13:09

      Yeah I think you're right. I mean it was probably a silly idea borrowing additional money on the home loan but I definitely still want to invest.

  • lnq on 01/03/2021 - 12:04

    "Birds born in a cage think flying is an illness"

    • Cluster on 02/03/2021 - 10:11

      Flying is a natural form of movement for almost all birds. How is bitcoin a natural and logical investment for people?

    • yoshi864 on 02/03/2021 - 15:15
      -1

      Agree. OzBargain's "bogan hive mind" doesn't understand Bitcoin or the value of decentralisation, and they are afraid of it.

      • SBOB on 02/03/2021 - 15:23
        +1

        or is it the crypto holders "hive mind" that makes you believe in its value ;)

        • yoshi864 on 02/03/2021 - 15:33
          -1

          I don't need any hive mind. I've researched the tech and the problems that it solves. I encourage you to do so as well (if you haven't already).

          • SBOB on 02/03/2021 - 16:34
            +2

            @yoshi864: Oh, I have crypto.
            I'm just more of a realist on its potential and future applications than many :)

          • deme on 05/03/2021 - 00:08

            @yoshi864: Mate write an algorithm that finds a n-bit partial preimage of H(seed+i)

            Where:
            H is SHA256
            i is a monotonic counter
            + is integer addition operator
            seed is the given seed value to start with.
            n is the number of zero bits at the start of the output of H

            Then I'll believe you actually understand how Bitcoin works.

            This should take less than 60 seconds to do you can use any language you like including pseudocode.

  • star-ggg on 01/03/2021 - 13:44

    hahaha, it really wasn't that long ago when BTC went from 20kUSD to 5kUSD and all the articles about having to work years just to pay off their debt.

  • Tiredman on 01/03/2021 - 14:14

    Risks are higher. It's up to you really. I'm still bullish on it though.

  • blorx on 01/03/2021 - 16:20

    I think there's more fun to be had in short-term gains due to the volatility - as such I'd take $1,000 and play around with some alt coins to get a feel for the market. Long-term who knows, there's a lot of speculation. BTC seems priced too high currently.

  • frewer on 01/03/2021 - 17:14

    If I was you, I would set my order around the blue box ( even little bit deeper ).
    https://www.tradingview.com/x/kGpxdhsf/
    BTC lost 1h, 4h and daily candles, plus weekly doesnt look too good either. It has been up for 5 months straight, so a red ( retrace ) month would be a healthy move for continuing bull run. Get in a group of a consistence-systematically-profit making traders to get a different perspective ( many heads are better than 1 ), dont trade based on emotion, news or bias.

    *Those things above are IMHO, not finance advices…

  • mr_asstight on 01/03/2021 - 19:16

    Just go all in. But I dunno tho

  • funnysht on 01/03/2021 - 20:00

    All use money that youre prepared to lose….borrowed money is not that.

  • Ononono on 02/03/2021 - 00:18

    Nobody gets rich by being safe, the most successful investors and businessmen became successful by taking a risk they believed in. If you have done your research and can explain every aspect of Bitcoin and cryptocurrencies (positives and negatives) and you really believe in its future, then put your money on the table and stop listening to the boomers on Ozbargain that get excited over a 1.0% HISA.

    • Tiredman on 02/03/2021 - 07:47

      This really.

    • gromit on 02/03/2021 - 18:00

      The problem here is not so much the risk of BTC but what he is risking to obtain it. If you have the cash and income to risk it then go for it. Borrowing money against your house when you could be in serious financial stress with an interest rate rise is the problem here..

  • MrKnowItAll on 02/03/2021 - 02:31

    Bitcoin has gone up a fair bit, but it's taken a long time and is considered to be over valued now. You would be better off purchasing a smaller coin and watching your investment grow.

    Plenty of alts see some stupidly big returns in very short time… Coins associate with a market can see huge returns over time as well, the more people who join the higher the value, BNB (binance) started at $6 a year ago, it's well over $200 now, some smaller markets might be a good investment like Big One or KuCoin as they're still in their infancy.. but, it's a huge gamble and you could go under a big amount very, very fast.

    • Tiredman on 02/03/2021 - 09:22

      Still salty about missing out on BNB. Insane stuff but that are some mad gains in Defi now but it's a cesspool of rug pulls. Those from Polkastarter are pretty good though, invested in almost all of them. Just be careful of the launch dump.

      • Nyclix on 02/03/2021 - 11:17

        Yeah I was in BNB at $20. Nuts to see what it is now lol

  • cunningdrew on 02/03/2021 - 11:22

    Do some research and buy Cardano ADA instead.

    • [Deactivated] on 02/03/2021 - 23:22
      +2

      'research'

    • deme on 05/03/2021 - 00:11

      DYOR BUY ADA AT ATH SELL AT ATL

  • striker5950 on 02/03/2021 - 12:39

    when you follow elon musk on twitter

  • CocaKoala on 02/03/2021 - 15:22

    Be careful mate. You're asking if you should play Russian Roulette with borrowed money.

  • FireSword on 02/03/2021 - 16:56

    I'm a big believer in Bitcoin and could see it hitting 200k by the end of year.

    Lets start here. Why do you think this?

    Did you have this same opinion 1 year ago? 2 years ago?

  • LordPanda on 02/03/2021 - 17:01

    OP are you crazy? Why would you take out a loan to throw it at something as crazy as BTC?

    Use some common sense.

    Invest in Cardano.

  • trapper on 02/03/2021 - 20:06
    +1

    My question is would it be ridiculous of me to use the equity I have in the home and borrow more from my bank in order to purchase 30-45k of Bitcoin

    Yes.

  • shortgum on 10/03/2021 - 07:01
    +1

    LOL

    • whooah1979 on 15/03/2021 - 07:11
      +1

      Today's price of USD 60k is cheap compared to the price in 2031.

  • amos83 on 15/03/2021 - 12:03

    in hindsight if you had done it when u created this post you would be up almost 30%.. but yeah nobody couldve predicted that..

    but the ones who were in favor of Bitcoin were right and the one who were against were WRONG…

    • idjces on 15/03/2021 - 14:19

      In hindsight he could have put it all in GME and made 120% in the last 3 weeks.

      Rather pointless detail.

      I'm all for making a bet, but don't make a bet where you can't live with the results, should you end up being on the wrong side of an outcome.

      • Nyclix on 15/03/2021 - 14:26
        +1

        I think I'd be okay but I've decided against it. I'd simply be borrowing 40k more from the bank at 2.24% for 5 years. Only like an extra $30 a week. where I'd get in trouble is if I lost it all and interest rates went to 5-6%.

        Still very confident BTC will be 200-250k EOY but you can never know.

      • amos83 on 19/03/2021 - 10:28

        GME is a splash in the pan.. Bitcoin has a 11 year history..

Login or Join to leave a comment
Login Join