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Mortgages for Expats in Hong Kong

Author: Jim Newham
Submitted: July 2013

Having decided where you want to live and which house to buy, the next stage of buying a property is finding the money to pay for it. For anyone except the very rich, this will involve taking out a mortgage.

Hong Kong mortgages are tightly controlled and are granted based on the borrower’s ability to repay, though the control has loosened a little of late. It is worth shopping around for a good deal on a mortgage, as lenders will be quite competitive to get your custom. This is especially true for the smaller banks, which may offer you incentives to take a mortgage out with them.

Mortgage types

The repayment mortgage is the commonest type in Hong Kong. The mortgage market is conservative, and it is very unikely you will find 100% loan-to-value (LTV) or interest-only mortgages. Normally, you will have to pay 30% deposit. Since this makes first-time buying difficult, the Hong Kong government has recently introduced the Mortgage Insurance Programme Through this initiative, residents may only need to pay a deposit as low as 5%, with the balance of the mortgage funded by the government-owned Hong Kong Mortgage Corporation (HKMC). Residents need to take out insurance on the mortgage loan and pass the eligibility criteria, notably including maximum debt to income percentages. For full details, see this page:

https://www.hkmc.com.hk/eng/pcrm/ourbusiness/Annex-3-English.pdf

Hong Kong mortgages are usually adjustable rate. The interest rate they are based on is ulitmately linked to the US Federal Reserve. The repayment period is generally 30 years. More mortgage options are gradually becoming available. For example, fixed-rate mortgages are being introduced, by the HKMC as well as commercial lenders.

Mortgage Application

Ther first stage of applying for a mortgage is to sign a document giving the lending institution authority to check your credit history. You will also need, at minimum, the following documents:

  • Copy of passport or Hong Kong ID Card
  • Copy of the sale and purchase agreement
  • Bank statements and tax returns

Other Conditions

Only full status mortgages are available – you must be able to demonstrate your income. This makes getting a mortgage very difficult if you are self-employed. The maximum term is  30 years, and the highest full repayment age is 70. The lower of these two figures will apply, that is, if you take out a 30-year mortgage at 42, you will need to repay it at the age of 70.

Fees and other payments

Other charges you will have to meet include the following. Mortgage Tax; Lawyer’s fees (variable and negotiable); Lender’s arrangement fee, 0.5%; valuation fee.

In one of the government’s measures to curb house price increases, Stamp duty has recently been increased. Properties under HK$2 million pay 1.5% stamp duty, while for more expensive properties the tax is now at 8.5%. In addition, in an effort tyo discourage mainland Chinese property speculation in the territory, stamp duty for non-permanent residents has been increased to 15%.

 

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