Increase mortgage if valuation goes up?

[antelope123]

Our bank (Bank of China) has confirmed that the valuation of our property has gone up $1.5M since we bought it. Can we draw down 70% of this and increase our mortgage?

This is obviously a question we should be asking our bank, but I'd like to get confirmation from people who may have tried this before (with BoC or otherwise) in case we get unlucky with an under-informed bank employee (it wouldn't be the first time).

thanks

[PDLM]

I'm in the process of doing this with HSBC. It's very straightforward. In HSBC's case they set it up as a separate loan with separately negotiated T&Cs. In my case that means a slightly higher (0.1%) interest rate but better early repayment terms and I still get the cash-back as well. There are no one-time fees either. It seems like a no-brainer to me - borrow another $1M at, say, 3.75%, shift it into RMB bonds. Bring it back into about 10% more HKD a year later. Profit about HK$80K with very little risk indeed.

[antelope123]

Appreciate the reply.

Our bank informed us that we need to apply for refinancing, and they'd like to know the reason we're doing so. We're going to use the cash either to renovate the original property or to invest in another, but haven't decided. Would either one of these be preferred to state as a reason we're refinancing? Does the bank actually consider this (I would have guessed they care mostly about salary)?

One more question - if we get into a second property, I understand from other discussions that the government will likely classify profits on that property with cap gains tax, since it's obviously an investment for profit. What is capital gains tax for property profits in HK?

Even our first house is for investment primarily, since we remain renting an apartment while we let out the first. Will we need to pay profits tax / cap gains tax on this as well?

thanks in advance

[KnowItAll]

Keep in mind that sometime, during this year, shit will hit the fan.

Would you want two properties with negative equity, if that happened? 1997-2000 seem like yesterday.

If you can deal with that .. then no problems. Borrow.

By the way, no cap gains tax in HK.

[PDLM]

No capital gains tax, but there is a tax on the profit of businesses. As the previous poster says, I would expect tax to be due on the profits accruing from a property bought solely for investment purposes.

And it is indeed so - see Property Tax - What you need to know as a Property Owner

[antelope123]

Thanks PDLM.

KnowItAll - you project property market trouble this year? You don't think mortgage rates of ~3% for the next 6-?? months will act as significant support? Also, why has the HK market not given up any gains at all despite large losses on Shanghai / Hang Seng? I can't see SH/HS dropping more than another 20%, since below that, China growth seems to offer solid support, and where else will all of the China cash go regardless?

When I look at upside vs. downside risk, I see some great fundamentals, including supply constraints supporting a good 1-2 years?

[KnowItAll]

Heard all the same stuff from the bankers a few years ago, then SARS happened.

All the folks who throw numbers and stats at you, will be on the next flight out when things go wrong in this town.

Just giving you a small hypothetical scenario to think about, given that history does repeat itself.

[walkup]

If the bank is asking for a reason then provide one...renovating an apartment is a good investment, but only if the tenancy agreement is coming to an end does it make sense! You might ask a mortgage advisor re if there is any issue re quality of answers provided.