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Mortgage |
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Each bank in Hong Kong has its own standard mortgage form. In May 2000, the Hong Kong Mortgage Corporation Limited introduced a Model Mortgage Deed which banks may adopt. This model mortgage deed is in English and a Chinese translation is available. Generally speaking, a mortgage deed will contain, among others, the following provisions: |
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| a. |
Charging/mortgaging clause
The mortgagor charges/mortgages his property to the bank as security. In an "all-monies" mortgage, the property will be security for all the indebtedness from time to time of the mortgagor without any ceiling. Therefore, if a mortgagor requests a release of the mortgaged property from the mortgagee, the mortgagee, in principle, has the right to request the mortgagor to repay all his indebtedness then owing to the bank, including, for example, any overdraft facilities granted after the advance of the original mortgage loan.
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| b. |
Redemption right
When the mortgagor has repaid all his debts to the mortgagee bank secured on the mortgage, the mortgagor will have the right to request the mortgagee bank to release the mortgaged property to him. However, the relevant legal costs of the release will be borne by the mortgagor.
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| c. |
Events of default
Apart from failure of the mortgagor to repay his indebtedness, a mortgage deed will also set out other events of default under which the mortgagee bank will be entitled to request all the money secured under the mortgage to be repaid immediately and to take possession of the mortgaged property. Such events include (among others) the mortgagor becoming bankrupt or being wound up, the mortgagor's breach of any provisions in the mortgage and any breach of warranties in the mortgage. In addition to any events of default, most mortgagee banks also reserve the overriding right in the mortgage deed to require the mortgagor to repay all outstanding indebtedness on demand at its full discretion.
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| d. |
Mortgagee's remedies
When any event of default happens, the mortgagee bank will have the power to exercise its rights over the property, including entering into possession of the property, letting or selling the property and exercising any right of ownership over the property. The mortgagee bank also has the right to appoint a receiver to exercise said rights on its behalf at the cost of the mortgagor.
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Facility letter |
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When a loan is approved, the bank will usually issue a facility letter to the borrower. The facility letter will set out the amount, interest rate and tenor of the mortgage loan and other terms and conditions of the loan. |
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Guarantee |
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If the borrower is not capable of producing sufficient income proof to support his loan application or where the borrower is a limited company, the bank will usually require the borrower to provide a guarantor acceptable to the bank. The guarantor will be required to execute a deed of guarantee to the bank. In respect of a borrower which is a limited company, the guarantor is usually a director or major shareholder of the borrower.
The bank will usually incorporate a "principal debtor clause" in the guarantee giving the bank the right to request the guarantor to pay without first demanding payment from the borrower.
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4. |
Rent assignment |
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If the mortgaged property is subject to existing tenancies and particularly if the amount of rent receivable is substantial, the bank may require the mortgagor to execute a rent assignment assigning the mortgagor's interest in the rent to the bank as an additional security for the mortgage loan. |
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