Like Tree18Likes

90% mortgage but not living there - risky?

Reply
Page 1 of 4 1 2 3 4 LastLast
  1. #1

    Join Date
    Sep 2012
    Posts
    26

    90% mortgage but not living there - risky?

    Hi everyone - I am planning to purchase a property with a 90% mortgage and want to rent it out. Does anyone have any experience of doing this? I know I am supposed to live in it in order to get the 90% mortgage. How likely is it that the bank will check - assuming the mortgage is paid on time?


  2. #2

    Join Date
    Jul 2006
    Posts
    3,891
    Quote Originally Posted by cracker:
    Hi everyone - I am planning to purchase a property with a 90% mortgage and want to rent it out. Does anyone have any experience of doing this? I know I am supposed to live in it in order to get the 90% mortgage. How likely is it that the bank will check - assuming the mortgage is paid on time?
    As far as I know, you get one letter from HKMA after 6 months asking you to confirm you are resident, which you have to be extra careful to tick the right box and send back to them. Done, forever.

    You never have any dealings with HKMA at all except for that sole letter. If you can be sure that y.o.u get that letter and your tennant doesn't, very little risk.

    Even if you rent out and the tenant gets receipts and a contract from you and claims income tax relief and you declare your earnings to the IR; AFAIK, there's no correspondence between the 2 agencies.

    The bank won't care and won't check, as long as you don't proactively tell them, the extra 30% comes from HKMA not the bank.

  3. #3

    Join Date
    Sep 2012
    Posts
    26

    Many thanks, very useful


  4. #4

    Join Date
    Jul 2006
    Posts
    3,891
    Quote Originally Posted by cracker:
    Many thanks, very useful
    You can also speak to Macky Fung at M-Referral (well respected mortgage broker in HK) for a latest opinion on this.

    She is a very good person to arrange a mortgage through too - her fee is paid by the bank not by you.

  5. #5

    well its illegal to do so - there are cases of such cases being checked and serious fines/penalties

    secondly do you plan on having a stamped tenancy agreement?

    finally do you plan to report income on rental as well?

    basically your asking a question you know the answer to already.


  6. #6

    Join Date
    Mar 2008
    Posts
    961

    From experience the bank will send you a letter asking you to confirm you are living there, by sending them proof like a utility bill or something. Just need to make sure your tenant passes along any letters. Many landlords declare self-use but end up renting it out.

    Sage likes this.

  7. #7

    Join Date
    Mar 2020
    Posts
    2,130

    Of course it's risky, that's why no one is keen to lend money for this unless there are assurances. A small downturn puts you in negative equity, you have a bigger mortgage which means it's more vulnerable to an increase in interest rates which combine with an an absence of tenant or lower rent could male meeting mortgage payments more challenging. Not a big deal if you have assets to cover difficult times otherwise it's a gamble that sometimes leaves you exposed to losing the property. Basically, that's often the way people get in trouble, biting off more than they can chew.

    Coolboy likes this.

  8. #8

    Join Date
    Jul 2006
    Posts
    3,891
    Quote Originally Posted by Aramis:
    Of course it's risky, that's why no one is keen to lend money for this unless there are assurances. A small downturn puts you in negative equity, you have a bigger mortgage which means it's more vulnerable to an increase in interest rates which combine with an an absence of tenant or lower rent could male meeting mortgage payments more challenging. Not a big deal if you have assets to cover difficult times otherwise it's a gamble that sometimes leaves you exposed to losing the property. Basically, that's often the way people get in trouble, biting off more than they can chew.
    You reply like this is a buy to let property empire and the OP is highly leveraged. That's not the driver in HK.

    The HKMA is lending the extra 30%, not the bank. The bank's risk is more than covered with 40% equity 'in the bank' and they simply don't care beyond that.

    The HKMA's motivation is to stop buy-to let fuelling more price increases but still allowing individuals the chance to own a property.

    The reason that they DON'T check with any thoroughness (and thus why it's not risky) is that they have little to lose.

    1 man, 1 flat - Their principal objective is met. They're happy.

    Big Panda has a much better grasp on the reality of this situation.

  9. #9

    Can you calim the interest deductions or renovations deductions?


  10. #10

    Join Date
    Nov 2019
    Posts
    1,656

    If you’re going to rent out, seek permission from the Lendor.

    https://clic.org.hk/en/topics/landlo...tyWithMortgage

    If you don’t, you tenant might get a letter from the bank.

    So what happens? Your tenant gets kicked out by the bank for trespassing. You have to cover the tenant’s”quiet enjoyment” of the property, plus any loss they incur. Let’s say you signed a 2 year tenancy and the tenant receives a letter from the bank and gets kicked out 6 months into the tenancy, you would have to pay for the tenants loss, as you leased a property without seeking the bank’s permission.

    Tenant Loss = 6 Months Rent (1 year fixed)
    Tenant Loss = 18 Months Rent (1 year fixed with tenant option for further year)

    https://clic.org.hk/en/topics/landlo...ithMortgage/q1

    shri and qhank like this.

Reply
Page 1 of 4 1 2 3 4 LastLast