How to buy a first time property in Hong Kong for a Permanenet (newbie) resident

[averageguy]

Hi fellow Geoexpatters, so there is a situation to buy a property first time but absolutely clueless about what is needed to be researched.

There are a few things as listed below found over the internet but not sure if other bits are missing, would anyone have more advice or recommendations for lawyers/companies etc?

Some details are:
Borrowing amount: HKD 1.5 to 1.7 million
Period: 10 years and 15 years (looking at these two periods only)

Current questions that have been thought of to ask at the banks:

Annual percentage rate
Interest rate
Amount to borrow
Amount to pay each month for 10 years (actual full amount)
Amount to pay each month for 15 years (actual full amount)
Application Fee
Credit Evaluation Fee
Loan Processing Fee
Appraisal Fee (cost of estimating the value of the home)
Title Search
Title Insurance (which protects myself)
Documentation fee (arbitrary fee)
Underwriting fee (arbitrary fee)
Prepayment penalty
Amortization schedule fee
Financing statement fee
Appraisal review fee
Credit Report review fee
Inspection fee
Photo inspection fee
Benefits for taking out the loan (i.e. free fire insurance)

Cheers for any help!

[MandM!]

Not thattt difficult...

When you're ready to buy, for most estates the bank valuation can be found online.

For HSBC:
https://www.hsbc.com.hk/personal/mor...tion-tool.html

*Also on this page you will find mortgage calculators to determine what you can borrow based on your salary. Any debt will lower the amount you're able to borrow. You need to prove your income with tax returns. Undocumented income doesn't count.

Each bank has its own valuation and they can vary greatly. You'll be expected to pay anything over the valuation price at 100%. You can typically ask a bank to raise the valuation by 100-200k.

If you cannot find the valuation then you ask the bank to give one to you. This is free and may take a day or two.

Know the mortgage borrowing rules and ratios. For your own residence you can borrow 60% maximum. If the building is a village house or more than 30 years old then banks start rejecting to lend to you. Also, they use 70 minus your age to determine the maximum loan term typically.

**There is mortgage insurance program that lets you borrow up to 90% under 4m and up to 80% from 4-6m.

When you're ready. You submit your offer. Once the purchase agreement is signed. You submit to a few banks and they will come back with their offers. There are no bank fees. In fact the bank will give you 1% cash back and have a 2-3 year prepayment penalty period. Simple. Ask for you loan term and interest rate (APR). Now I think it's H+1.4 caped at P-2.75. H is hibor and P is prime. So it ranges from 1.8-2.25% but lately it's been 1.8-2.0%.

Most people will use an agent to find the landlord. Absolutely not needed if you found the landlord and can bargain the sales price yourself. Agents take 1% commission.

Then you find a lawyer. They do all the work and I've typically paid Hk$5k for one in Central. The lawyer will need a cheque for the stamp duty. You can calculate it at the link below. For permanent resident first property use the cheaper (2nd table). Then the lawyer will ask for cheques in accordance with your contract and they typically need them several days before the due dates so be prepared for that. I would do a walk through of the property to make sure everything is ok. Then they give you the paperwork and all is done, at this stage you pay the agent their commissions (if applicable). Entire process takes about 2 months.

Stamp Duty Rates:
GovHK: Stamp Duty Rates

[MandM!]

Example on amounts you can borrow.

Sales price 5.2m
Valuation 5m
Loan amount 60% of 5m = 3m
Stamp Duty 3% of 5.2m = 156k
Agent fee 1% of 5.2m = 52k
Lawyer fee 5k

5.2m + 156k + 52k + 5k = 5.413m - 3m loan = 2.413m cash needed

If you ask the bank to raise your valuation to 5.2m. Then you would get 60% of 200k or 120k more on the loan. So you would pay 2.413m - 120k = 2.293m out of pocket with a 3.12m loan.

You will pay in stages and to different people.

And apply early. It can take banks several weeks to get back to you with their approval/offer.

[averageguy]

Thank you so much MandM! It's very useful information that I will keep. are you able to extend your advice further for mortgages with housing authority schemes? Like white and green form applicants and so forth?

Really appreciate this!

[MandM!]

Sorry I'm not too sure about white/green form.

What I have heard is that once you buy a public property then you are not eligible for the public rental. I think green form let's you buy at the cheapest price whereas White form you need to buy a property that has settled the additional land premium (so sales price is higher) to the government but they had some schemes to forgo this but you had to apply by ballot. The land premium in theory represents the subsidised difference, aka should be closer in line to the private market prices.

I believe the loan process is similar.