Mortgage for a Flat to Let

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  1. #1

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    Mortgage for a Flat to Let

    I'm thinking of buying a flat of around $1.6M to rent out and have some questions about the mortgage terms.

    I have just checked my Transunion rating is "A".

    1. Do banks offer 70% mortgages if I declare outright that the flat will be let?
    2. What is the "penalty" interest for rental property vs self-use? Can I expect P-2.5/2.75% with my good rating?
    3. Can I formally apply to the banks before I have a provisional S&P?
    4. If necessary to get a better rate, what if I "live" in the property for a month or two and then let out? Would I need the consent to let if the mortgage is only 60%

    Thanks for any replies.


  2. #2

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    Quote Originally Posted by DarrenChan:
    I'm thinking of buying a flat of around $1.6M to rent out and have some questions about the mortgage terms.

    I have just checked my Transunion rating is "A".

    1. Do banks offer 70% mortgages if I declare outright that the flat will be let?
    2. What is the "penalty" interest for rental property vs self-use? Can I expect P-2.5/2.75% with my good rating?
    3. Can I formally apply to the banks before I have a provisional S&P?
    4. If necessary to get a better rate, what if I "live" in the property for a month or two and then let out? Would I need the consent to let if the mortgage is only 60%

    Thanks for any replies.
    The only question I have a definite answer for is 3 - No, you can't apply for a mortgage until you have a signed provisional S&P agreement.

    As far as I know, if you get a 70% mortgage or less then you can do what you want with the flat. If you get more than the 70% via HKMC, then you need to declare that it is for you to live in.

  3. #3

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    1. You should declare to the bank that you intend to let the property, although many people don't. For some banks, it won't affect the % that they offer. If you need a mortgage over 70%, then letting the property (and informing the bank) would be a problem, especially if the extra is through the HKMC.

    2. I don't think there is a penalty with some banks, but that would depend on the bank. Shop around.

    4. I think officially you need to inform the bank if you move out and begin to let it. Read the terms and conditions of the mortgage contract carefully.

    Last edited by drumbrake; 09-09-2010 at 08:44 AM.

  4. #4

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    >> No, you can't apply for a mortgage until you have a signed provisional S&P agreement.

    But you can get pre-approved for a certain amount - with conditions related to valuation etc etc.

    From what I've heard from people who buy property to rent, as long as the property rental income is more than the mortgage, this should not be a major problem (not sure what the fine print is though..)


  5. #5

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    Thanks for all the replies. I did some further research since my first post and now know that the 70% cap and a declaration for self-use were imposed by the HKMA in their guidance note to banks issued in August 2010 as part of their admin measures to limit investment activity.

    I guess that, with banks being profit-motivated, a declaration would not be required for a 68% mortgage. The sticking point would be whether to obtain a "consent to let".


  6. #6

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    Banks don't pro-actively check to see if your property is let. However, if you require the 'consent to let' letter, then you should check the t&c of the banks. For example, I know some simply charge a flat 1.5-2K for the letter whilst another insist that the tenancy agreement must be sent to their on-list solicitors for vetting, with all costs borne by the owner of the property. The latter would be a major hurdle in terms of time and costs.


  7. #7

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    I just checked with my banker - Hang Seng - they do not have pre-approval service. Does anyone know which banks do have pre-approval?


  8. #8

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    Quote Originally Posted by DarrenChan:
    I just checked with my banker - Hang Seng - they do not have pre-approval service. Does anyone know which banks do have pre-approval?
    Remember that there is no obligation to use the bank you use for payroll for your mortgage. Shop around for the best rates - either do the legwork yourself, or use a broker such as mreferral.

  9. #9

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    Quote Originally Posted by Swell:
    Banks don't pro-actively check to see if your property is let.
    Incorrect. My bank sends me an annual letter requiring me to verify my residence at the property in question.

  10. #10

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    Quote Originally Posted by DarrenChan:
    I just checked with my banker - Hang Seng - they do not have pre-approval service. Does anyone know which banks do have pre-approval?
    I wasn't able to find a bank that did pre-approval when I was looking last November time...and I spoke to a lot of banks...

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