Hong Kong - too difficult to own a home
Mortgage schemes in Hong Kong are not very helpful for new home buyers:
Hong Kong is one of the world’s most expensive property markets and owning a home there is near to impossible for a majority of the residents. Many first-time homebuyers in the special administrative region of the People’s Republic of China are struggling to finance their dream homes. Most of the time, they are unable to meet the 30% down payment threshold set for mortgage financing because of the ever-rising prices of property and the increases of other expenses associated with homeownership. There is also the practice that a homebuyer can provide 10% as the minimum deposit percentage, but this small deposit will require the person to provide an extra premium to the Hong Kong Mortgage Corporation along with a proof that he has the ability to repay the mortgage finance advanced; this is applicable to people who purchase homes whose value is HK$4 million or less. It is difficult to find a good home priced at that amount. However, the person can negotiate a middle ground and get an exclusive offer to make 20% down payment, but this will also require him to provide an insurance cover as well as proof of sustainable income. This leads the person to the option of the 30% down payment but as the property prices soar, this amount becomes increasingly expensive to afford.
Home seekers also have the option of obtaining mortgage insurance which can secure mortgage finance. This not only helps a home buyer to secure the financing needed, but he will still enjoy the same interest rate as those who were able to secure the required down payment of 30%. Banks will pay the premium payments required and eventually pass the costs of the premiums to the home buyer’s mortgage payment. He can choose to pay off the mortgage insurance costs in one lump or alternatively have the premiums distributed in his monthly mortgage repayments.
VARIOUS LOANS
Mortgage financing options available in Hong Kong include Construction Credit or loan, which is availed by investors who are developing property or those planning to build their own homes; home equity loan, which allow the prospective home buyer to use the real equity of the property as collateral to acquire additional financing for home renovations: blanket mortgage, which covers more than one project and comes with a partial release provision that enables an investor to remove the lien attached to a single property separately once it is sold; package mortgage, which covers personal property such as furniture, which is being sold together with a real estate property; open mortgage, which can be paid earlier than normal without attracting any penalties; open-end mortgage, using which the credit can be reopened and borrowed against part of what has already been paid; and sales-leaseback, which is not essentially a loan, but a source of financing where a property investor sells the property to another investor with an agreement to remain in the property under a lease.
The major mortgage loan providers in Hong Kong are: Banks, which provide most of the mortgage loans adopting prudent and stable policies in approving mortgage loans; Developers, who 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; Other finance companies, which sometimes 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.
BANKS THAT OFFER LOANS
Some 15 banks, including all the top 10 mortgage lenders, have combined 86% of mortgage market share. The top banks offering mortgage loans are HSBC, Bank of China (HK), Hang Seng Bank, Standard Chartered Bank, The Bank of East Asia, ICBC and DBS Bank-Hong Kong.
Hong Kong had recently raised the mortgage entitlements for borrowers. The government announced raising the mortgage cap to 90% from 60% for homes valued at HK$8 million. The loans cap for borrowers eligible for 80% loan financing – from 50% – was raised to HK$10 million. Home markets were down after the 4-month old anti-government protests and the new rules are expected to give a push to the market. Under the new plan, a buyer just needed to put down HK$700,000 down payment and apply for a HK$6.3 million loan from the HKMC’s insurance program.