Smart Guide
Glossary

 

Mortgage Glossary
Mortgage Deed
  • Obtaining a mortgage loan invariably involves the execution of a mortgage deed by the mortgagor in favour of the mortgagee. A mortgage deed will contain the following provisions: charging/mortgaging clause, redemption right, events of default and mortgagee's remedies.
Facility Letter
  • ● When a loan is approved, the bank will usually issue a facility letter to the borrower. The facility letter will set out the amount, interest rate and tenor of the mortgage loan and other terms and conditions of the loan.
Legal Charge/ Mortgage
  • A mortgage of a legal estate may be effected at law only by way of a charge by deed expressed to be a legal charge.
Equitable Mortgage
  • This document enables a purchaser to charge and assign his interest under an agreement for sale and purchase of a property in an uncompleted building to a financier.
Re-financing
  • ● This refers to a situation where a mortgagor obtains a new mortgage loan from another mortgagee on the security of his property to repay his original outstanding mortgage loan to the existing mortgagee. The relevant procedures involve the mortgagor executing a new mortgage over his property and obtaining a release of the property from the original mortgagee. The usual reason nowadays for a mortgagor to apply for a new mortgage loan is to obtain more favourable loan terms, such as a reduction in the interest rate.
Further Charge
  • ● A mortgagor creates a further charge when he wants to obtain additional finance from his existing mortgagee on the security of property which has already been mortgaged.
Bridging Loan
  • ● A bridging loan may be created when the borrower obtains a short-term loan to pay the purchase price of another property which he has contracted to buy before the sale proceeds of his existing property are available. Such a short-term loan (commonly referred to as a bridging loan) is usually required to be repaid at a fixed date.
Fixed Rate Mortgage
  • ● Fixed Rate Mortgage is a mortgage that has a fixed interest rate for a set and specified period of time
Floating Rate Mortgage
  • ● Floating Rate Mortgage is a mortgage where the interest rate varies during the duration of the loan..
Mortgage Insurance Programme(MIP)
  • ● The Mortgage Insurance Programme was introduced by the Hong Kong Mortgage Corporation Limited (HKMC) in 1999 to assist home ownership in Hong Kong by allowing a purchaser to obtain a mortgage loan over 60% to maximum 80%(eligible particular cases up to 90%) of the value of the mortgaged property without increasing the credit risk of the mortgagee bank.
Premium of MIP
  • ● The amount of premium payable under the Mortgage Insurance Programme varies according to the relevant loan-to-value ratio, loan tenor and payment method to reflect the credit risk of the relevant mortgage loan.
 
Debt-to-income ratio (DTI)
 
 
  • ● This refers to the percentage of the loan to the value of the property (which is usually the lower of the purchase price or the valuation of the property) by reference to which the bank will set the maximum amount of the loan.
Loan-to-Value
(LTV) Ratio
  • ●This refers to the percentage of the total monthly repayment amount to the borrower(s)’  total income per month.

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