First-time homebuyers often seek mortgage plans with higher loan ratios, such as the Mortgage Insurance Programme, which allows for lower down payments. In Hong Kong, banks may offer mortgage loans up to 70% of the property's value. However, it's important for buyers to understand that different banks have varying policies and may apply different loan-to-value (LTV) ratios depending on the property type.
For self-occupied residential properties, banks typically provide a maximum LTV of 70%, regardless of the property's price. Under the Mortgage Insurance Programme, eligible applicants may secure loans of up to 90% of the property's value.
Banks generally impose a limit on the total of "the remaining term to maturity" and "the property's age," often capping it at 40 or 50 years. For instance, if the limit is set at 50 years, a property that is 30 years old would qualify for a mortgage with a repayment term of only 20 years.
Small village houses in the New Territories are considered a unique category and may be evaluated more cautiously by banks. These properties might face lower LTV ratios, higher interest rates, or shorter repayment terms. Additionally, small village houses are not eligible for the Mortgage Insurance Programme.
How Much Deposit Do I Need?
The loan-to-value (LTV) ratios for banks are determined by the Hong Kong Monetary Authority. Currently, the LTV for all residential and non-residential properties is set at 70%, meaning a deposit of 30% is required. For example, if an apartment is valued at $5 million, the down payment would be $1.5 million, with the remaining $3.5 million covered by the mortgage.
With a mortgage insurance programme, borrowers can apply for a higher LTV ratio, significantly reducing the deposit required. While this lowers the upfront cost, it also necessitates paying an insurance premium.
Before approving a mortgage, banks will assess your debt-to-income ratio and conduct a stress test to ensure you can handle the loan repayments. Typically, monthly mortgage payments should not exceed 50% of your income. The stress test also evaluates your ability to afford payments if interest rates rise, which would increase monthly costs.
A mortgage is a long-term commitment, often lasting 20 to 30 years. Higher LTV ratios lead to larger monthly payments, so it’s crucial to ensure affordability, especially in light of potential interest rate increases. It's also wise to have financial reserves for emergencies, such as job loss or health issues, to maintain consistent payments.
Steps to Apply for a Property Mortgage in Hong Kong (Updated Oct 2024)
The best time to apply for a property mortgage can vary, so consulting a mortgage broker in Hong Kong may be beneficial. They can help you find the best rates from major lenders, most of which are regulated by the Hong Kong Monetary Authority.
1. When to Apply?
- You can apply for a mortgage once you have a Provisional Agreement for Sale and Purchase (PASP) or seek pre-approval (“indicative approval”). Non-binding pre-approvals provide a general idea of your mortgage options, while formal pre-approvals are binding but expire after a set period.
2. What Documents Are Needed?
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Generally, banks require the following documents for mortgage applications:
1. Your Hong Kong Identity Card or valid passport
2. Provisional Agreement for Sale and Purchase (PASP) and any attachments (for newly purchased property)
3. Existing mortgage details (if applicable)
4. Tenancy agreement (if applicable)
5. Proof of income
For self-employed applicants:
1. Latest profits tax demand note from the Hong Kong Inland Revenue Department, or
2. Latest audited financial statements, including profit and loss statements and balance sheets
3. Business Registration Certificate
3. Do I Need Insurance?
- Fire insurance is mandatory when applying for a mortgage loan. If your property isn’t covered by a master policy, you must obtain individual fire insurance. Some mortgage plans may offer discounts on fire insurance applications.
4. Final Step.
- Once your mortgage application is approved, the bank will send a confirmation letter detailing the mortgage terms. Your solicitor will then arrange the signing of the Assignment Deed and Mortgage Deed before the completion date and coordinate the loan disbursement with the bank.
For Reference:
Maximum LTV Ratio
|
Property Value# |
Maximum LTV Ratio# |
|---|---|
|
Up to HK$10 million |
80% or 90%* |
|
Above HK$10 million and |
80% or 90%* |
|
At or above HK$11.25 million and |
80% |
|
Above HK$15 million and |
70% - 80% |
|
Above HK$17.15 million and |
70% |
|
*Only applicable to application with (i) all mortgagors not holding any residential properties in Hong Kong at the time of application and (ii) all applicants being regular salaried persons (please refer to the relevant Insurance Eligibility Criteria) **Only applicable for provisonal agreements for sale and purchase before 16 October 2024 |
|
Source: Mortgage Insurance Programme
