How to Get A Mortgage in Hong Kong

 

For the first time buyer looking to enter the Hong Kong Property Market, finding a suitable mortgage plan may seem like a daunting task. Yet in truth, the practical steps behind securing a mortgage via application to your respective mortgage provider can prove quite straightforward. The details are paramount and a number of key considerations should inform your decision making process. 

 

 

Fixed-rate Mortgage

 

If you are adverse to interest rate fluctuations and looking to take out a long-term mortgage, the set rate of interest provided in a fixed-rate mortgage could present a stable if not predictable option. Typically available in 15, 20 or 30 years terms, as a borrower you must be mindful of current interest rates since high levels could make qualifying for a mortgage loan more difficult. 

 

Flexible-rate Mortgage

 

Determined either by the Hong Kong Interbank Offered Rate (HIBOR) or Hong Kong Dollar Prime Rate (Prime) flexible-rate mortgages typically enables the borrower to qualify for a larger loan with low initial payments. Beneficial in the near term or when interest rates are predicted to fall, rising interest rates could prove punitive to the long-term borrower unless a monthly cap on mortgage expenses are part and parcel to your plan. 

 

Deposit-linked Mortgage 

 

Touted as offering a preferential annual interest rate, this mortgage plan either links to your deposit account and provides an interest rate equivalent to your mortgage’s interest or leverages the current deposit amount to reduce your mortgage interest payment for each period. HIBOR or Prime based, it is important for first time buyers to properly consult their banking representatives. 

 

 

Loan-To-Value Ratio and Stamp Duty 

In deciding upon your mortgage plan, it is crucial to be aware of the maximum Loan-To-Value Ratio as well as stamp duty rates. Whilst a conventional mortgage will allow up to 50-60% of the property’s value depending on price, for properties worth under HKD 6 million, borrowers have the option to apply for the Mortgage Insurance Program which allows for 90% of the property’s value to be covered by the mortgage plan. In terms of stamp duty, this is subject to different price bands and can range anywhere between 1.5% to 8.5% upon the sale or transfer of property. 

 

Ultimately, the issue of affordability comes into play. As a borrower, you have the option to use a variety of online tools including mortgage calculators to make informed budgeting decisions. You also have to be conscious of the fact that you will incur other costs such as the solicitor’s fee and agent commission.

 

Applying for a Mortgage

 

Having selected a property through a realtor, decided on an appropriate mortgage plan and resolved questions of affordability, you can now submit your application to a mortgage provider which by default in Hong Kong, is the bank. 

 

Upon receiving your application the bank will arrange for a valuation of the property you intend to purchase, prepare mortgage terms and assess your repayment ability. In approving your mortgage application, the bank will then arrange for you to sign a confirmation letter as well as various necessary contracts which include the Formal Sale and Purchase Agreement as well as the Assignment Deed. You will then be required to pay the full deposit and the Government stamp duty via your solicitor before receiving the repayment schedule from your bank. 

 

Once your bank has disbursed the mortgage loan amount to the seller, your property buying process will be complete. 

 

 

Some major banks in Hong Kong

HSBC	http://www.hsbc.com.hk
STANDARD CHARTERED BANK	http://www.standardchartered.com.hk
BANK OF EAST ASIA	http://www.hkbea.com
HANG SENG BANK	http://bank.hangseng.com
BANK OF CHINA (HONG KONG)	http://www.bochk.com/en/home.html
CITIBANK HONG KONG	http://www.citibank.com.hk/portal/home_english/hkcb_Home.htm