What to Consider When Applying for a Mortgage in Hong Kong
Before you apply for a mortgage in Hong Kong, it is vital that you conduct a thorough research first. This is one of the biggest loans that you will ever make in your life. You want to make sure that you will approach it carefully and with much thought. Knowing the status of the housing market is a great way to start.
According to an article published in Bloomberg.com, Hong Kong homeowners should brace themselves for a decline in the value of properties in this region. Apparently, home values are threatened by the behaviour of the Hong Kong stock market. Experts believe that the decrease in retail sales, a decline in port activities, and a slowdown in Chinese tourism will affect the housing market in Hong Kong. Add to that the reputation of this region as being one of the most expensive real estate investment – you can see why the housing market is going to experience a downward turn in the next few months.
This data, as scary as it seems, does not have to get rid of your hunger to be a home owner in Hong Kong. From an investor’s standpoint, it is not an attractive market to buy into. However, if you intend to live in the house that you are buying, it makes sense to buy a property rather than renting for the rest of your life.
Things to consider before you borrow a home loan
Of course, you can always wait for a while to see how the market will turn out. As you are waiting, there are a couple of considerations that will require your attention. After all, you need to apply for a mortgage in Hong Kong because the price would make it nearly impossible to buy a house in cash.
So what are the important considerations that you have to look into before you apply for a home loan?
Apart from the housing market and the trends, you need to understand the mortgage policies in Hong Kong. The most important question that you need to answer involves the deposit. According to the data provided by the Hong Kong Mortgage Corporation Limited, the ideal mortgage imposed by the Hong Kong Monetary Authority is 60%. That means your loan to value ratio has a cap on 60%. If the house you intend to buy is HK$5 million, you can only borrow a maximum of HK$3 million. You need to prepare HK$2 million as your deposit. This is the rule when you are buying a house that is valued lower than HK$7 million.
Of course, if you qualify for the Mortgage Insurance Programme, you might be allowed to give only a 20% deposit and be approved of a mortgage with an 80% LTV ratio. The deposit is only one of the things that you need to look into when it comes to the mortgage policies in Hong Kong. You should also be aware of the interest rates – it will tell you if it is a good time to buy in the current housing market.
Your financial position
Another important consideration before you apply for a mortgage in Hong Kong is your personal financial position. How much can you really afford to pay for your house? It is not enough that you consult a mortgage calculator or get a pre-approval for a mortgage. You need to sit down and take a look at your income and expenses to determine how your monthly home loan payments will fit in your current budget. If you have to draft a new budget plan to accommodate this payment, do it. You need to visualize how home-ownership will affect your life.
Your credit situation
This does not only refer to your credit score – which is an important basis for lenders when it comes to calculating your mortgage interest rate. Beyond your credit score, you need to look into your overall debt situation. How can you continue paying all your credit obligations on top of your basic expenses while having enough left to pay for your mortgage contributions?
If your credit situation is not a problem, you need to go back to your credit score to see how it will affect your mortgage application. What terms will your credit situation grant? Since you are still waiting before you can buy a house, this may be a great time to improve your score so you get the best terms when you apply for the home loan. Remember, if you have a bad credit score, your monthly payments will probably increase because of the higher interest rate.
Your future plans
The final consideration that you need to make before applying for a mortgage in Hong Kong is your future plans. This will determine the repayment plan that will suit your finances. For instance, if you know that your job will give you regular salary increases, then you can get an increasing monthly repayment method. If you are unsure, opting for a fixed monthly instalment method may be a wiser choice. If you want to pay off your mortgage faster so you can invest in something else, fortnightly repayment method is the perfect plan for you.
How much will it really cost to get a mortgage in Hong Kong
You also need to be aware of the different costs that you will encounter when you buy a home in Hong Kong. If you notice in the statistics provided by the Hong Kong Monetary Authority website, mortgage delinquency in Hong Kong is very low. This is probably because homeowners are prepared before they buy.
To help you become completely prepare, here are the different home buying costs that you will encounter during the process:
- Agent fees. It is a common practice in Hong Kong to buy a house through a real estate agent. They make the process less complicated. Of course, you need to pay for that convenience – which is normally 1% of the selling price of the house.
- Legal fees. This can also include the solicitor’s fee. This is the law firm who will help you review the documents involved in buying a house and even your mortgage in Hong Kong. They will make sure everything is legal and done correctly so you will not have problems with the law. This fee is usually HK$2,000 to HK$50,000.
- Land Registry fees. This is paid to the Hong Kong Land Registry office – usually to file that you are the new owner of the house. The cost to register an agreement for sale or for a mortgage is usually HK$210.
- Land Records Supplying fee. This is the amount that you will pay the Hong Kong Land Registry office to help you search for land records connected to the property you will buy. It will help authenticate any document provided by the seller. This is usually included in the solicitor’s fee – which is only around HK$25.
- Stamp Duties. Any document involved in a property sale or lease in Hong Kong is taxed through the stamp duties. There are different types of the buyer’s stamp duty, double stamp duty or the special stamp duty. Ask your solicitor what type of stamp duty applies to you so you can prepare the amount needed.
These preparations before applying for a mortgage in Hong Kong may seem overwhelming but it is better to be ready for anything. In the end, your knowledge of the home buying process will allow you to make the right decisions that will lead you to the best terms when it comes to your home loan.Recommend0 recommendationsPublished in