Hong Kong Mortgages

Mortgages in Hong Kong are available from any number of competing banks. Hong Kong mortgages are usually quoted based upon the Prime Rate or the HIBOR.

Prime interest rate is set by the banks themselves, usually about 3% above Fed funds. In the past, the prime rate was the bank's best lending rate, ie the lowest rate a preferred customer might receive, but these days you can expect to have your mortgage quoted as prime minus X%, or P-2% for example.

HIBOR is the Hong Kong Interbank Offered Rate, or the rate at which banks offer money to loan each other. Similar to LIBOR, this is a market rate and as such is subject to market conditions, but normally it is similar to Fed funds.

The minimum down payment required on a Hong Kong mortgage is 30%. This requirement may be reduced to as little as 5% by taking out mortgage insurance via a bank on the Hong Kong Mortgage Corporation's approved seller list. The cost of mortgage insurance may be paid up front, or some banks may allow it to be added to the loan amount.

Hong Kong banks will determine their interest rate on a mortgage based on their own set of qualifying standards. For example, any buyer requesting a loan for less than 70% of the property value, and not requiring insurance, will likely receive a more favorable rate than a buyer who requests 75%, with insurance. The buyer requesting 75% with insurance would still receive a more favorable rate than a buyer only putting the only putting down the minimum 5%, including insurance. As expected, credit ratings and credit history are important, and a borrower with a less-risky credit rating will normally be given a better rate than a borrower who has missed a payment or two.

There is a peculiar local term used in relation to properties in Hong Kong which is "clean" and it means that there have been no suicides or deaths on the premises. If the property is not clean, banks (who have a list) are unlikely to provide a mortgage.

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ExpatFlats - Hong Kong Mortgages