Mortgage Issues and Solutions for "Haunted Homes"

“Haunted homes”—properties where untimely deaths or serious crimes took place—have always been a subject of intrigue for Hong Kong people. However, if you were to actually buy a haunted apartment, the process of securing a mortgage could be just as scary as the history of the home itself. In fact, haunted homes, apartments in aged buildings and subdivided flats are the three most difficult types of housing to obtain a mortgage for.

In the past, haunted homes were deemed as “unusual properties” by banks, and mortgage applications for these homes were handled with extra caution and often refused. Fortunately, Hong Kong banks have introduced more inclusive and relaxed mortgage loan policies in the past few years—i suppose they’re more afraid of people not being able to afford housing than fearing ghosts. Haunted homes are commonly sold at a 10-30% discount, making the selling prices of some haunted flats lower than average market rates. Plus, they also tend to attract a lot of attention from bidders at auctions. Now that it’s easier to obtain mortgages for haunted homes, they are no longer the undesirable odd properties they used to be.

There isn’t a standard definition for haunted homes in the market. Usually, they refer to homes where unnatural deaths, such as suicides and murders, have happened while deaths of natural causes or illnesses do not make a home “haunted”. Moreover, there isn’t an official record of relevant data on such properties. Property valuation agencies, however, do keep some types of internal records of their own, therefore each bank may have slightly different records of properties, which in turn may lead to varying mortgage approval results.

Generally speaking, when given an assignment by a bank, the valuation service provider would determine whether the property in question is a haunted home by checking its records and the news. The bank would then take the information and assess the home’s future value and resale potential, before making a decision on the mortgage application. I once had a client who bought a unit that was deemed a haunted home by a valuation agency for unspecified reasons. The bank, unable to determine its resale potential, initially refused his mortgage application. Thankfully, the home buyer later discovered the backstory of the property himself: its former resident committed suicide by jumping out the window. With this new piece of information, the bank was willing to properly evaluate the property’s location and appreciation potential, and finally approved a mortgage loan of 60% LTV ratio. This case shows that the details of the “haunting” and the unit’s future potential have a big influence on whether a bank approves mortgage applications or not.

If a haunted unit has been resold multiple times, the next buyer will have even better chances at securing a home loan. At the same time, for units located close to a haunted home, be it next door, upstairs or downstairs, banks tend to give out low LTV ratio mortgages or raise the interest rates, but at least don’t scrutinise them the same way they do haunted homes.

If you’re worried about accidentally purchasing a ghostly unit, here are a couple of useful tips. Firstly, you can directly ask your real estate agent, who, according to the Estate Agents Authority’s Code of Ethics, has the responsibility to inform buyers if their potential home is haunted. Secondly, be extra careful if you can’t get a valuation on the property you’re interested in, for it could be a haunted home you’re looking at. Make sure to do more research and find more information before buying a home like that. On the other hand, if you are inclined to buy a haunted home, it’s worth obtaining valuations from multiple banks first or seek assistance from mortgage referral companies.