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2018 Tax Loans

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  1. #11

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    Original Post Deleted
    for him to get 4mio hkd of tax loan, his income should be high enough.. in their perspective they are happy to take the risk the bdw will not bail on such a job for just that 3~4mio hkd ?

  2. #12
    Quote Originally Posted by freeier:
    for him to get 4mio hkd of tax loan, his income should be high enough.. in their perspective they are happy to take the risk the bdw will not bail on such a job for just that 3~4mio hkd ?
    Also, since it's based on income, they can assess your general salary in the marketplace. In case a job loss occurs and one ends up with a lower salary, they can easily adjust the tenure of the loan or negotiate new terms. The real risk for them would be that the borrower becomes unable to work due to sickness/injury/etc. I guess the chance of that is low.

  3. #13

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    errr my income not that high compared to a lot of you guys around here. But I was extremely lucky when I decided to stop renting and purchase and apartment in HK back in 2009 and the increase in value of my apartment each year is more than my salary, coupled with a H+0.7% mortgage means the interest expense on my apartment has only been around $3k/month vs renting around $30k/month for the same apartment. So 9 years of saving shitloads without paying rent and I admit you might find me in Wan Chai now and then but I'm still pretty stingy so I've managed save up a bit now.

    The other secret in being able to borrow so much is leveraging. My initial citibank loan of $1.5m (they let you borrow around 12-18 months salary), was then invested in unit trusts in Hong Kong with Standard Chartered. Then the secret is they will give you an overdraft secured by unit trusts, up to around 60-90% of the value of the trust. So invest $1.5m in unit trusts, they will give you an overdraft around $900k-$1.3m at super low interest rates of 1.75%. Then send all that overdraft money overseas to pay off higher interest rate mortgage. Leave just a little bit in HK for day to day expenses and overall I have a big negative account balance in HK.

    So this is really what I did a year ago. What has surprised me now is SCB calling and offering me even more money when I still have 3 years to run with this big citibank loan. But if they want to give me free money I will take it. Actually they've just emailed me some documentation and it's actually not a tax loan but a "credit to cash" loan where they lend me money from my unused credit card limit and then the monthly repayments come out of my CC. They have this on their website but the APR is not good around 3-4%, but they offered me 1.86% (0.08%/month) because they gave me a bullshit story about being one of their good customers.

    On a side note, the unit trusts I purchased have not done too badly (Allianz income and growth HKD). In 12 months, price increase from 8.86 to 9.18, plus they give 0.07 dividend every month so I think that works out to around 12% return last year.

    I agree with I dont know myself how I've been able to borrow so much money and how the regulators allow this to happen. Some people may get in a lot of trouble doing this. I feel in my particular case, I'm taking some risks on the unit trusts but then in the end I'm just borrowing at low rates to pay off higher rates overseas and I still keep the cash liquid and can reverse the whole arrangement quite easily. So I'm comfortable with the risks I'm taking.

    I've made plenty of stupid decisions in my life too. Buying SCB shares when they were over $200, buying an apartment in Kuala Lumpur on the 21st floor of a building with a leaky swimming pool on the 22nd floor, etc . But overall I'm doing OK.

    Last edited by bdw; 18-01-2018 at 11:46 AM.

  4. #14

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    Oct 2016
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    243

    Hmmm... your story has me seriously considering applying for one of these tax loans and using it to make a lump sum repayment off my UK mortgage (interest rate 2.59%, and I can make up to 10% overpayment every calendar year without incurring charges) and/or stick it in my "savings" (currently lend money via P2P lending platforms in the UK, earning around 5% interest on average and after factoring in bad debt), or just put it in the kids savings accounts which earn 4%.

    As I bank with HSBC I assume I am limited to them for loan purposes. I figure I can comfortably afford to borrow about $200k max (I am by no means in the same salary league as most of you on here, and I also don't work in finance/banking!!!!) over a year. Based on what HSBC offer me, monthly repayments would be $16,910 and total repayable $202,920.

    Now they quote an APR of 2.54%, but I've never been able to get my head around the whole APR thing... I make the interest payable $2920, which on $200k I calculate to be 1.46%??? So does this sound like a bit of a no-brainer (even factoring in fees/charges for the money transfer to the UK)? Or have I missed something in my calculations...


  5. #15

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    Quote Originally Posted by bdw:
    errr my income not that high compared to a lot of you guys around here. But I was extremely lucky when I decided to stop renting and purchase and apartment in HK back in 2009 and the increase in value of my apartment each year is more than my salary, coupled with a H+0.7% mortgage means the interest expense on my apartment has only been around $3k/month vs renting around $30k/month for the same apartment. So 9 years of saving shitloads without paying rent and I admit you might find me in Wan Chai now and then but I'm still pretty stingy so I've managed save up a bit now.

    The other secret in being able to borrow so much is leveraging. My initial citibank loan of $1.5m (they let you borrow around 12-18 months salary), was then invested in unit trusts in Hong Kong with Standard Chartered. Then the secret is they will give you an overdraft secured by unit trusts, up to around 60-90% of the value of the trust. So invest $1.5m in unit trusts, they will give you an overdraft around $900k-$1.3m at super low interest rates of 1.75%. Then send all that overdraft money overseas to pay off higher interest rate mortgage. Leave just a little bit in HK for day to day expenses and overall I have a big negative account balance in HK.

    So this is really what I did a year ago. What has surprised me now is SCB calling and offering me even more money when I still have 3 years to run with this big citibank loan. But if they want to give me free money I will take it. Actually they've just emailed me some documentation and it's actually not a tax loan but a "credit to cash" loan where they lend me money from my unused credit card limit and then the monthly repayments come out of my CC. They have this on their website but the APR is not good around 3-4%, but they offered me 1.86% (0.08%/month) because they gave me a bullshit story about being one of their good customers.

    On a side note, the unit trusts I purchased have not done too badly (Allianz income and growth HKD). In 12 months, price increase from 8.86 to 9.18, plus they give 0.07 dividend every month so I think that works out to around 12% return last year.

    I agree with I dont know myself how I've been able to borrow so much money and how the regulators allow this to happen. Some people may get in a lot of trouble doing this. I feel in my particular case, I'm taking some risks on the unit trusts but then in the end I'm just borrowing at low rates to pay off higher rates overseas and I still keep the cash liquid and can reverse the whole arrangement quite easily. So I'm comfortable with the risks I'm taking.

    I've made plenty of stupid decisions in my life too. Buying SCB shares when they were over $200, buying an apartment in Kuala Lumpur on the 21st floor of a building with a leaky swimming pool on the 22nd floor, etc . But overall I'm doing OK.
    12% return ordinarily not bad, but against the HKSE or even S&P performance last year, that fund has clearly underperformed the market by quite a bit. Also did you factor in the subscription fee to the calculation?

  6. #16

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    Quote Originally Posted by Firemin:
    As I bank with HSBC I assume I am limited to them for loan purposes.
    No you are not, as long as you have stable income you can try get loans from any bank, Im with HSBC only but in the past have gotten loans from SCB / Dah Chong Bank.

    Im useless with the APR thing as well LOL

  7. #17

    Join Date
    Feb 2009
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    8,280
    Quote Originally Posted by Firemin:
    Hmmm... your story has me seriously considering applying for one of these tax loans and using it to make a lump sum repayment off my UK mortgage (interest rate 2.59%, and I can make up to 10% overpayment every calendar year without incurring charges) and/or stick it in my "savings" (currently lend money via P2P lending platforms in the UK, earning around 5% interest on average and after factoring in bad debt), or just put it in the kids savings accounts which earn 4%.

    As I bank with HSBC I assume I am limited to them for loan purposes. I figure I can comfortably afford to borrow about $200k max (I am by no means in the same salary league as most of you on here, and I also don't work in finance/banking!!!!) over a year. Based on what HSBC offer me, monthly repayments would be $16,910 and total repayable $202,920.

    Now they quote an APR of 2.54%, but I've never been able to get my head around the whole APR thing... I make the interest payable $2920, which on $200k I calculate to be 1.46%??? So does this sound like a bit of a no-brainer (even factoring in fees/charges for the money transfer to the UK)? Or have I missed something in my calculations...
    You are not limited to HSBC. I bank usually with SCB and had no relationship with Citibank at all a year ago until they offered me this tax loan and they had the best offer at the time. Now SCB offering me more money and its a bit easier this time around with less forms to fill out, no need to show ID and income proof, can do all over the phone. But basically shop around and go for the lowest interest rate.

    Borrowing only $200k wont get you the best rate. You might need to borrow more with some banks to get the best rates. I know it sounds aggressive, but dont go with what you can comfortably afford, go for the MAX the banks will give you because the money is so cheap. Maybe not send it all to the UK and do some investing in HK with some of the money that can easily be converted back to cash and used to repay the loan when you need it. As an example, buy some shares in HSBC, HK electric, etc that give dividends over 5%, then if you find you cant make the loan repayments you slowly sell the shares. In my case, I purchased unit trusts in Allianz which returned me 12% last year. There are some risks here I admit. But thats what makes it more fun and interesting

    The whole APR thing confuse me too. The rate on the loan I'm taking now is actually 0.08% per month. Depending on length of loan and a bunch of other factors, handling charges etc determines the APR. But basically anything under 2% APR is pretty good.

    Lastly, don't listen to anything I'm saying. I'm an idiot on the internet and don't work in banking or finance. I'm just sharing my laymans experiences and will not be for everyone. I'm just particularly surprised how cheap and easy it is to borrow money unsecured in Hong Kong every year around December - February and I really want to wake people up and make them realise these 'tax season loans' are NOT for idiots that didn't save enough during the year to pay their taxes. For 9 years in Hong Kong I really thought this. These loans are FREE MONEY for smart people that want to do a bit of investing and playing around with property, shares, whatever other forms of investments you have in mind. For expats in particular, its a fantastic and low risk way of paying off higher rate mortgages etc overseas.

  8. #18

    Join Date
    Oct 2011
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    871

    but mostly the banks only can offer loan up to 12x your monthly salary, which means we only can borrow less than $1M for most of us here (including me )
    APR would definitely more than 2-3% for loan less than $1M


  9. #19

    Join Date
    Oct 2016
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    243
    Quote Originally Posted by Andy SNK:
    but mostly the banks only can offer loan up to 12x your monthly salary, which means we only can borrow less than $1M for most of us here (including me )
    APR would definitely more than 2-3% for loan less than $1M
    HSBC state max 10x monthly salary...

    According to SC website they will lend up to 19x monthly salary! That’s insane!

  10. #20

    Join Date
    Apr 2017
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    73

    @Firemin
    IMHO, only borrow what you can repay on a monthly basis from your monthly income. Dont max out unless you are a financially savvy investor. And your 5% return on P2P is too low for the risk, better keep it in the 4% kids account or buy index trackers/equity in your ISA account.


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