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Banks |
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Most of the mortgage loans in Hong Kong are provided by banks. Under the supervision of the Hong Kong Monetary Authority (HKMA), banks generally adopt prudent and stable policies in approving mortgage loans.
In the selection of mortgagee banks, a mortgagor should take into account: |
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The loan amount and its terms (for example, interest rate, repayment tenor, any early repayment charges/penalties, etc) that the bank is prepared to offer. |
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| b. |
Other charges, such as handling fee, valuation fee, etc., that the bank requires and whether any of these charges are payable if the applicant does not draw down the loan after his application is approved. |
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Whether the bank requires the property to be insured with any designated insurance company and the amount of insurance premium payable. |
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Other benefits, such as cash rebate or legal costs subsidies, that the bank is offering as incentives for the mortgage loan application. (Any cash rebate in excess of 1% of the loan amount will be treated as part of the mortgage loan for calculating the 70% loan-to-value ratio under HKMA's guidelines.) |
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Follow-up services that the bank is prepared to offer after the execution of the mortgage. |
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The length of time it normally takes for the bank to approve a mortgage loan and whether the bank is efficient in its response to the mortgagor's requests and queries. |
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| g. |
Whether the bank has a stable policy regarding the granting of mortgage loans. |
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If there is any flexibility in the repayment plan, whether the bank is prepared to agree to a change in the repayment plan should there be any alteration in the financial situation of the mortgagor, and any bank charges if there are changes in the repayment plan. |
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| i. |
If the bank responds quickly to a change of its best lending rate and whether the bank is quick to increase the mortgage interest rate when there is a rise in its best lending rate and slow to reduce the mortgage interest rate when its best lending rate drops. |
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Developers |
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Developers often provide different payment and finance schemes to purchasers as part of their marketing strategies. The most common are co-financing schemes with banks in which developers arrange for second mortgage loans through their subsidiary or related finance companies, as discussed in Section 5.6, to finance purchasers of selected developments.
A purchaser should carefully consider the terms of such a second mortgage loan (which may carry a higher interest rate and shorter loan tenor than a bank loan).
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Other finance companies |
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Besides banks, other finance companies provide mortgage loans. Sometimes, these finance companies may be able to provide certain types of mortgage loans that are not usually available from banks, for example, when banks are not willing to accept older properties, say over 30 years of age, as security or if the mortgagor requires a mortgage loan over 70% of the value of the property, and is not eligible for the Mortgage Insurance Programme. In such cases, the mortgagor may try to obtain a loan from a finance company. Mortgagors should note that the interest rates charged by a finance company are likely to be higher.
Some mortgagors may want to obtain second mortgage loans from finance companies. However, this will require the consent of the first mortgagee.
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