7. What should a purchaser do if a mortgage is needed?
It is best to inquire at a bank(s) about the possibility of a mortgage on the flat in question before you sign the provisional sale and purchase agreement. Failing that, the purchaser should apply to a bank for a mortgage immediately after signing the provisional agreement.
In August 2020, the Hong Kong Monetary Authority (HKMA) issued a new circular to banks requesting them to apply a maximum loan-to-value (LTV) ratio. For residential properties which are for self-use with a value at or above HK$10 million, the maximum LTV ratio is 50%. For residential properties with a value less than HK$10 million, the maximum LTV ratio is 60%, subject to a maximum loan amount of HK$5 million.
If the main income of the mortgage loan applicant is not derived from Hong Kong, the maximum LTV ratio will be lowered by 10% points and for residential properties which are for self-use with a value below HK$10 million, the maximum loan amount will also be lowered to HK$4 million.
If the mortgage loan applicant or guarantor has borrowed or guaranteed other outstanding mortgage at the time of making the mortgage application, the maximum LTV ratio will be lowered by 10% points with also reduction to the maximum loan amount.
Please see the applicable details on the HKMA circular.
The Mortgage Insurance Program (MIP) provided by HKMC Insurance Limited, a wholly-owned subsidiary of the the Hong Kong Mortgage Corporation Limited can provide mortgage insurance to banks, which subject to meeting the relevant eligibility criteria (the maximum property value and the maximum loan amount, etc.), can in effect permit banks to provide a mortgage loan of up to 80% LTV ratio under the MIP.
Please refer to the webpage of Mortgage Insurance Program under the Hong Kong Mortgage Corporation Limited for the maximum LTV ratio and eligibility criteria details.
Also, the MIP is not available to applicants whose principal income is not derived from Hong Kong.
What if the purchaser wants to acquire an additional and/or second mortgage?
The purchaser needs to check whether the terms of the first mortgage allows an additional and/or second mortgage before applying to a bank for an additional or second mortgage.