Renting a flat

[jacky_se]

I just bought a new property, and I have the impression I bought it exactly on the day the property prices peaked in HK. That's marvelous!

Anyway, I was going to pay for that property with the sale of my old flat. However, it seems that the price of my old flat dropped, and I can make less than I was planning to. At least according to agents. That's marvelous!

Now I did the math again, and I believe I can make more money by renting out my flat than by selling it an investing the money in some safe venture (I am not a risk-taker) such as CLP shares or Chinese bonds.

I will give the flat to my daughter in 18 years, when she turns 18 and the flat will be fully paid. In the meantime I can use it for blackmail (if you don't eat the soup you won't get the flat)

Now the question is: I believe I have to tell the bank from which I got the mortgage that I am renting the flat? Everybody actually does this? The agents told me I don't actually need to, and nobody actually does it (though of course this isn't allowed). Are there controls from the banks or the government?

[bdw]

If you originally took out a mortgage for more than 70% of the purchase price for your old flat (ie you used the HK Mortgage Corporation), then the rules are much tighter and you need to inform the bank if you intend to rent it out. But if you did not borrow more than 70%, I think you can do what you want.

[Rayzilla]

If you originally took out a mortgage for more than 70% of the purchase price for your old flat (ie you used the HK Mortgage Corporation), then the rules are much tighter and you need to inform the bank if you intend to rent it out...

In these situations, what does the HKMC generally do? I heard that what they are 'supposed' to do is to have you top off your payment to bring the LTV ratio of 70%. But I heard that usually, nothing is required to be done after your report it.

Anyone experience or heard what happens?

[pin]

If you originally took out a mortgage for more than 70% of the purchase price for your old flat (ie you used the HK Mortgage Corporation), then the rules are much tighter and you need to inform the bank if you intend to rent it out. But if you did not borrow more than 70%, I think you can do what you want.

Are you sure of this?

I'm pretty sure that if you change the use of your flat, regardless of how much you borrowed, you need to notify your bank?

Actually I was going to post a question about this point, but I guess I'll deal with it here.

Situation is that we own a property, which we were living in and when the mortgage was taken that is what we told the bank. Now we intend to rent out the property. My understanding you are supposed to notify the bank that you will be renting the property out. However, in reality, how many people actually do this?

[HowardCoombs]

However, in reality, how many people actually do this?

From what I understand, very few to practically none.
I asked my lawyer, was told legally I must tell the bank.
I asked my accountant, he told me to keep my mouth shut and they will never find out.

[shri]

>> I asked my accountant, he told me to keep my mouth shut and they will never find out.

Better keep your auto-pay income from the renter in a different bank. Hope the tenant does not start a fire and your fire insurance is with the same bank. If you pay stamp duty would the bank find out? Would the bank at some point ask for your tax returns for some other purpose and would that show rental income? Would your estate agency record the transaction and perhaps that may leak back to the bank.

Yeah, I'm waaay to paranoid about things in life.

[drumbrake]

The bank can ask you for proof that you are living in the flat - for example recent bills in your name for the place. For this reason, it can be a good idea to keep utility bills in your own name if renting out a flat.

[pin]

From what I understand, very few to practically none.
I asked my lawyer, was told legally I must tell the bank.
I asked my accountant, he told me to keep my mouth shut and they will never find out.

OK. Irony is my bank knows that I'm renting my flat out, but I bought the flat as an investment and told them from the beginning. It was when there was a lot of cheap cash floating around so I got the same rate as if I was a home-owner.

In the case of the place we are living in at present, the bank is fine with us renting it out, they say they will just re-assess the mortgage (i.e. I think that means increasing the rate).

We may leave things as is, and not tell the bank. Rental was done privately, however we will probably get the rental stamped.

[zymu]

after they have already given u a loan, the banks have no reason nor incentive to go over your stack of financial information again unless you're missing payments and near default.

so what you do with the home is basically up to you.

they're not gonna randomly audit your shit and make sure you're living there or renting. they just don't really care after that point... they're busy enough... unless you fk up and give them reason to check you out.

[bdw]

I think I remember now, the rule is actually if you want to rent out your property you need to inform the bank and usually its no problem. But if you involved the HKMC (mortgage corporation) in your mortgage (ie you borrowed more than 70%, or these days maybe 60%), then you are barred from renting out your property at all. The HKMC simply will not allow it. Of course, this doesnt mean you cant do it anyway and probably wont get caught.

I borrowed 80% back in 2009 from Standard Chartered. So I had to go through the HKMC and I remember my bank clearly telling me and making me sign forms that I will not rent out the property. But I wonder if I can do it once the LTV ratio goes below 70%. This I will need to double check.