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90% mortgage but not living there - risky?

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  1. #21

    Join Date
    Jul 2006
    Quote Originally Posted by LoganH:
    As far as I know, banks can send a letter whenever they'd like to ask you to confirm that your above 60% (maybe it's above 50% I don't know) mortgage is for a property that you use as your primary residence. I think banks also could even perform other checks (a visit? - I don't know) if they so choose to perform due diligence on whether or not your property is actually your primary residence, and not rented out.

    Maybe you're right that banks usually only send one letter as part of an HKMC requirement. I can't remember if I only got one for my first property. I think I've only received one for my current property, and I was quite upset as it was dated at the beginning of May I didn't receive it until the end of May (to the appropriate mortgaged property address). As many people know it usually only takes one business day for a letter to be delivered to another address within HK. I don't think even during the worst of COVID times it took 3 to 4 weeks to deliver a letter mailed within HK to another address within HK. (Sorry that's an irrelevant rant except that I do live in my only flat, and I don't want a penalty that I don't deserve.)

    I've shared information, but other people can do whatever they'd like with it. If I was a bank, I'd care about making as much money as possible, and getting caught doing something illegal (like many have) is an expense, which would hurt the bottom line, so I'd avoid doing things illegal and getting caught (unless the fine/penalties are significantly less than the reward, which also happens too often).
    I'm sure the bank can send letters - It's that they don't that's important in this thread.

    Again, the letter i'm referring to was from HKMC, not the bank, and I suggest yours was too.

    This has implications for the perceived risk being discussed: You need to remember that the purchase I'm taking about was in 2009 - Long before the special buyer stamp duty came in. So then, the only mechanism to check that you were occupant, was that solitary letter.

    Clearly the purpose of this check was to ensure that the HKMC wasn't giving low interest top up mortgages to landlords speculating on ever increasing prices, and yet they still only sent 1 letter, and never had ANY interaction with the owner otherwise. They trusted the bank completely to guard this mechanism.

    The bank for their part has never sent ANY letters to check on occupancy, zero, nada and so that shouts loud and clear that both the HKMC and the bank simply didn't care much. Born out entirely by real world examples.

    Fast forward to post SSD (special stamp duty) and buyers of multiple properties now have to stump up 20% extra - There are far more checks and legal hoops to jump through to satisfy that criteria, so why still bother with the flipping letter? - Because it's legacy from their old way of doing things.

    Read between the lines and you'll see that really the HKMC don't care if you rent out your property, what they care about is not financing people to own more than one property and building a rental business out of it that makes property unaffordable for people simply seeking to buy and live in a home. Which is the EXACT objective of the HKMC - to make property accessible for joe average. Does the ability to rent out your home if your circumstances change decrease or increase the accessibility of property to joe average?

    If no one is trying to catch you making a minor infraction of the rules that they don't really care about anymore, you chance of getting caught is much much lower than many posts on this thread would suggest.
    Last edited by Sage; 16-11-2021 at 03:39 PM.

  2. #22

    Join Date
    Feb 2012

    So it took me some time to find it, but so far I've only received one letter from my bank requesting me to confirm that my property with an HKMC MIP attached to my mortgage is only for self occupancy.

    I've edited the letter for sharing here, but I received this letter within 6 months of drawing down my mortgage in 2020.
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    Sage likes this.

  3. #23

    Join Date
    Feb 2012

    I can't find a similar letter that I probably received also within 6 months (definitely within a year) of drawing down my mortgage in 2016. I sold that property and bought my current one and thus I've only ever had one flat at a time and each one was only for my self occupancy.

    Every investment decision has risks and rewards including doing nothing (inflation risk and more). The key is trying to get paid appropriately for taking whatever risk you're going to take. I personally am trying to stay on the path that Paul Merriman lays out on his website, but for those wanting to get rich quick his writing will seem boring.

    ndt likes this.

  4. #24

    Join Date
    Feb 2009

    I rushed to refinance my mortgage with Standard Chartered at end of 2019, just a few months before I left HK and stopped getting a HKD salary. Then I rent it out, the rent I receive now covers the mortgage repayments, I'm all good. I dont know anything about a letter and I havent said anything to SC. I guess because I have only a 50% mortgage and no MIP this time. But I did previously borrow 80% and needed MIP from HKMC, dont really remember anything about a letter back then either.

    A 90% mortgage and not living in it, is a great form of investment if you are tax resident in other countries like Australia, because all that extra bank interest and expenses you pay associated with a 90% mortgage make it very easy to negative gear and make a paper tax loss on it, reduce the taxes you pay in Aus. But in HK its shit because you can't claim bank interest on your rental property as a tax deduction, just a flat 20% of rental income.

  5. #25

    Join Date
    May 2021
    But in HK its shit because you can't claim bank interest on your rental property as a tax deduction
    You want to blast property and rental market in HK? You have made/skimmed more than enough from HK, give a breather to locals..
    chuckster007 and woodwood like this.

  6. #26

    Join Date
    Aug 2021

    "The ICAC investigation arose from a corruption complaint"

    Last edited by shri; 31-01-2023 at 11:01 AM. Reason: edited link
    traineeinvestor likes this.

  7. #27

    Join Date
    Sep 2022

    What.. you are joking.. Name:  IMG-20230131-WA0000.jpg
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    That complaint must have come from somebody he knows, def a personal swipe. I know plenty of ppl who had/still have their property on the original 90% mortgage and undertaking that its for self-use, tax report rental income and claim tax deduction for mortgage interests.. and not a thing. Even the conveyancing clerk just told me oh ur not supposed to but lots of ppl do it still..

  8. #28

    Join Date
    Dec 2002
    Quote Originally Posted by sarsi:
    I know plenty of ppl who had/still have their property on the original 90% mortgage and undertaking that its for self-use, tax report rental income and claim tax deduction for mortgage interests.. and not a thing. Even the conveyancing clerk just told me oh ur not supposed to but lots of ppl do it still..
    To quote Mike Tyson (I think...)

    Everyone has a plan, until ICAC punches you in the face.
    traineeinvestor likes this.

  9. #29

    Join Date
    Sep 2022

    Backstabbing rat finks everywhere :O ICAC would probably go thru same process for anyone if somebody had lodged a corruption complaint..

  10. #30

    Join Date
    Jan 2013

    In this situation, as I understand it, there are two types of letters.

    HKMC Letter
    This is one letter that is sent six months after you purchase the property. You answer that you are living in the property. It is important to answer this letter.

    Bank Letters
    Sometimes the banks may (or may not?) send you letters every year after you purchase the property.

    My questions are:
    * Do the bank letters ask for a reply?
    * If they ask for a reply, is it important to do so? If the tenant takes your letter and you don't reply to the bank, will something bad happen?