The mortgage, a loan secured against all or part of the value of a property, is the most common loan and financing option for homes in Hong Kong. Be aware of the difference between first-hand developments and second-hand properties when applying for mortgages as this can come into play.
In this scenario, the bank or mortgage provider will pay the purchase amount to the seller, and you will make regular payments to the mortgage provider until the loan is paid. The usual loan repayment period is 25 years although the terms and duration of the mortgage may vary considerably with each bank. For other properties, the loan repayment period plus the property’s building age cannot be more than 40 years.
In Hong Kong, some banks may require you to join the Mortgage Insurance Program if your mortgage loan amount is more than 70% of the appraised property value or the current market value (whichever is lower). With the Mortgage Insurance Program, banks are able to offer up to 95% financing.
In deciding which home loan or mortgage plan to apply for, first ensure that you have a stable income and then consider your loan repayment capacity. Take into account all your monthly expenses and deduct that figure from your gross monthly income. If that figure falls between 40% to 50% of your gross monthly income, and you are able to dedicate that amount to your monthly loan repayment, then, more often than not, banks will approve your mortgage application.
For your mortgage application, you will need to come to the bank personally. Bring original documents and photocopies of each document. These documents may include your Hong Kong Identity Card, evidence of income in the form of a few recent pay stubs or a letter verifying your employment, evidence of liabilities, such as your credit cards and other existing loans, and recent tax returns as well as references from your company and personal associates.
The bank will evaluate your assets and discuss terms of loan, such as the length of time. Approval usually takes between one to three working days, although some banks do offer express approval.
Once your application has been approved, the bank’s lawyer will prepare the mortgage deed which should include information such as the loan amount, interest rate, any preferential facilities and so on. You will have to pay the mortgage legal fee, which is relative to the property’s price.
Once signed, the lawyer will register the mortgage deed in The Land Registry, and the bank will hold on to the property deed until the entire loan has been repaid.