Smart Guide
Mortgage Guide

 

New Mortgage
90% LTV Mort
Re-Financing
Gov't Measures
 
New Mortgage
Property Valuation

During the process of mortgage application, the Bank will normally arrange the valuation for the property.  The maximum loan amount will be set by reference to the lower of the appraised value or transaction price of the property.  For example, a client purchased a property at HK$5,000,000 and he intended to apply a mortgage up to 60% of the purchase price.  However, the property was valuated at HK$4,800,000.  Therefore, the maximum loan amount approved by the bank was around HK$2,880,000 in this case since the bank would only assess the loan amount according to the lower value. (i.e. HK$4,800,000 x 60% = HK$2,880,000)

Loan-to-value Ratio

 

(Residential Property)

Self-use property

Starting from October 16, 2019 onwards, a client can apply to the bank for mortgage up to LTV ratio of 80% (or up to 90%*) of the transaction price/ appraised value of the property through the "Mortgage Insurance Programme". For properties with a value at or above HK$9 million, the maximum LTV ratio will be up to 80% (or up to 90%*)(loan amount capped at HK$7.2 million); For properties with a value at or above HK$9 million and below HK$10 million, the maximum LTV ratio will be up to 80%.

 

*Remarks: (Regular salaried first time homebuyers with a maximum debt-to-income ratio of 05% may still be eligible for the maximum MIP cover of 90% LTV, subject to bank final approval. Homebuyers who can’t pass stress test can still apply for MIP cover of 80%-90%, with extra insurance fee regarding risk assessment.)
 

Starting from February 27, 2015 onwards, for properties with a value at or above HK$10 million, the maximum LTV ratio will be up to 50%. For properties with a value at or above HK$7 million and below HK$10 million, the maximum LTV ratio will be up to 60% and the maximum loan amount capped at HK$5 million. For properties valued below HK$7 million, the maximum LTV ratio will be up to 60%.   

Non Self-use property

Starting from November 20, 2010 onwards, for properties which are not intended to be occupied by the owners, the maximum LTV ratio is up to 50%.

Property held by a Company

Starting from November 20, 2010 onwards, for properties which held by a company, the maximum LTV ratio is up to 50%

Non-residential Property

Starting from February 23, 2013 onwards, the maximum LTV ratio of mortgage loans for properties which are retail shop, commercial or industrial premises or standalone car park space are up to 40%.
Loan-to-value ratio

For mortgage borrowers whose income is derived mainly from outside Hong Kong (Regardless of Property Types)

Starting from Sept 15, 2012 onwards, for property mortgage borrowers whose income is derived mainly from outside Hong Kong, the maximum LTV ratio will be lowered by at least 10% regardless of property types or values; (If applicant has already borrowed or guaranteed outstanding property mortgage loans for one or more properties at the time of a mortgage loan application, the maximum LTV ratio will be lowered by at least 20% regardless of property types or values)

 *Exemption Arrangement:If applicants who can demonstrate that they have a close connection with Hong Kong (e.g. applicants who are seconded by local employers to work outside HK with documentary proof provided by the employers or applicants who have immediate family members(i.e. parents, spouse, and descendants) residing in Hong Kong will not be subject to the reduction in LTV caps.

Mortgage loans based on borrowers' net worth

For all residential Property

Starting from Sept 15, 2012 onwards, for property mortgage loans based on borrowers’ net worth (i.e. net worth-based mortgage loans), the maximum LTV ratio is up to 40%; (If applicant has already borrowed or guaranteed outstanding property mortgage loans for one or more properties at the time of a mortgage loan application, the maximum LTV ratio should not exceed 30%)

For all commercial and industrial property

Starting from Feb 23, 2013 onwards, for property mortgage loans based on borrowers’ net worth (i.e. net worth-based mortgage loans), the maximum LTV ratio is up to 30%; (If applicant has already borrowed or guaranteed outstanding property mortgage loans for one or more properties at the time of a mortgage loan application, the maximum LTV ratio should not exceed 20%)

Loan Tenor Starting from Sept 15, 2012 onwards, the maximum loan tenor for mortgage property is 30 years. Starting from February 23, 2013 onwards, the maximum loan tenor for standalone car park space is set at 15 years.

Early Prepayment Penalty

According to the terms and conditions stipulated in the loan agreement, the bank will charge the mortgagor penalty fee in the event the mortgaged property is redeemed in an early period (normally set as one to three years). Normally, the penalty fee rate is 3% if redemption is made in the 1st year; 2% in the 2nd year and 1% in the 3rd year. Some banks would provide mortgage plan with shorter penalty period or penalty waiver. It should be better to ask more for details in this respect.

The sum of age of borrower and loan tenor

This reflects the ability of the borrower to repay the whole mortgage loan. When a borrower gets old, his earning capacity will diminish and if the loan is not yet fully repaid, the risk of loan default will increase. Therefore, some banks set certain limits, such as 65 years, as the maximum sum of the age of the borrower and the loan tenor.

The sum of property age and loan tenor

This reflects the sufficiency of the value of the property as security of the loan. Where a property has become too old and the loan secured thereon has not yet been fully repaid, the value of the property may be insufficient to secure the outstanding loan. In respect of residential properties, banks in Hong Kong usually require the sum of property age and loan tenor not to exceed 60 years or 70 years. Some banks may require the age of the property not to exceed a certain limit, for example, 30 years.

For Debt-to-income ratio (DTI) and Stress-test

The 1st Property Mortgage Loan

According to the requirement set out by the Hong Kong Monetary Authority, the limit on debt-to-income ratio (DTI) of the total monthly repayment amount for the borrower should not exceed 50%(for self-use) or 40%(for non-self use) of his/her total income per month. In addition, banks should stress-test mortgage applicants' repayment ability, assuming an increase in mortgage rates of at least three percentage points, and limit the stressed DTI to a cap of 60%(for self-use) or 50%(for non-self use).

*(If borrower who apply for 2nd mortgage over 20% of property price, the debt-to-income ratio (DTI) of the total monthly repayment amount should not exceed 45%(for self-use) or 35%(for non-self use).

The 2nd Property Mortgage Loan

Starting from February 27, 2015 onwards, if applicant has already borrowed or guaranteed outstanding mortgage loans for one or more residential or non-residential properties at the time of a mortgage loan application, the total monthly repayment amount for borrower should not exceed 40%(whether for self-use or non-self use properties) of his/her total income per month. Besides, banks should stress-test mortgage applicants’ repayment ability, assuming an increase in mortgage rates of at least three percentage points, and limit the stressed DTI to a cap of 50%(whether for self-use or non-self use properties).

 *Remarks: (If borrower who apply for 2nd mortgage over 20% of property price, the debt-to-income ratio (DTI) of the total monthly repayment amount should not exceed 35%(whether for self-use or non-self use properties).

Remark: The above information is for reference only, and subject to the latest announcement of HKMA.

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