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Mortgage and flat buying question

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  1. #1

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    Mortgage and flat buying question

    I am currently looking into buying a flat using a 95% mortgage.

    I have read up on the typical buying procedure in Hk and am a little worried about the 5% down in an initial agreement and 5% to finalise the deal, as this means a 10% payment is needed surely?

    So, the question is as follows. Does this mean a 5% downpayment/95% mortgage is impossible, or do banks release 5% of the 95% borrowed to you to cover the second 5% payment you are required to make?


  2. #2

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    I think 95% loan will not be possible if you are buying from a developer or other seller who requires 10% up front. Not all require 10%, it varies and you can negotiate this.

    A 95% loan means it must be approved by the Hong Kong Mortgage Corporation and takes a lot longer for approval.

    I bought a new flat from Henderson Land recently. They had different payment options, but I think all of them required 10% to be paid within 3 days. For me, this was fine as I plan to borrow only 80% mortgage.

    They were very strict about this 10%. They needed 5% immediately and I didnt have my chequebook with me and they followed me home and didnt let me out of their sight until I had given them 5%.

    Then they wanted another 5% within 3 days. I assumed it was 3 business days, but I was wrong. It includes Saturday and Sunday. I bought on a Saturday and my money was actually in Australia and I had to TT it to HK ASAP. But my Australian bank was slow and the money did not get here on time.

    The bastards at Henderson told me they will keep my first 5% and sell the flat to someone else if they did not get the money by 5pm on that day. I explained to them it was coming from Aus and I thought I had 3 business days, but they would not budge. In the end, I had to borrow a lot of money from a friend who I was able to repay 24 hours later after the money arrived from Aus.

    Anyway, are you sure you want a 95% loan? The compulsory insurance premium is very high. I think it is about 4% of the total loan amount. I went with an 80% loan for 20 years so the insurance was only about 1%. Then they gave me a discount on the insurance because I was deemed 'low risk'. Not really sure how I got this status.


  3. #3

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    Quote Originally Posted by bdw:
    The bastards at Henderson told me they will keep my first 5% and sell the flat to someone else if they did not get the money by 5pm on that day. I explained to them it was coming from Aus and I thought I had 3 business days, but they would not budge. In the end, I had to borrow a lot of money from a friend who I was able to repay 24 hours later after the money arrived from Aus.
    Don't you just love those property companies!

    To the OP - also if you go through the HKMA, they need a lot more background information and financial proof than banks do for a 70% mortgage, and the whole process takes much longer. I think some banks, such as SCB in the past certainly, offer up to a 90% mortgage without having to go through the HKMA.

  4. #4

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    Also note that every 5% you can scrape together will lower the rate of mortgage insurance. So whilst you may not be able to get the loan ratio down to 70% to avoid the insurance altogether, if you can get it down to 90% or 85%, you will save a lot.

    Another thing is that HKD (which is pegged to the USD) is very weak right now. So if you have money overseas such as AUD, EUR or just about anything apart from USD, you should bring as much of it as you can to HK right now while you can get excellent exchange rates.

    This is what I have done and I am 'gambling' that the USD will recover in 1-2 years and then I can send my money back home again and make a bit of profit on this whole exchange.

    I wasnt initially planning to dig into my AUD savings too much. But in the end I did because of the combination of wanting to reducing mortgage insurance AND favourable exchange rates which I think I can profit from in 1-2 years.

    If you believe as I do that the USD will recover, just transfer as much foreign currency into HKD as you can right now. Borrow from family and friends if you need to. Then pay them back in 1-2 years when the USD recovers. If you are lucky and the USD has appreciated 10-20%, then you effectively pay them 10-20% less. In the mean time, the money in HK will help you get the mortgage insurance premium down as much as possible.

    Last edited by bdw; 05-01-2010 at 11:55 PM.

  5. #5

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    Thanks for all the info guys.

    It is good to hear that the 10% down is sometimes negotiable, even it doesn't sound too common an occurrence.

    I hadn't realised how much extra hassle (and money, as it looks like they whack on extra interest) it could be going through HKMA for a 70%+ loan. I'll definitely check out Standard Charter to find out about a possible 90% mortgage, cheers for letting me know.

    Re currencies, unfortunately I'm from the UK and currently the pound buys you peanuts in pretty much every single currency out there including the USD!

    Thanks

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    Deleted duplicate post - accident

    Last edited by kryzlowski; 06-01-2010 at 07:40 PM. Reason: Deleted duplicate post - accident

  7. #7

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    Im with Standard Chartered. They will give you a 90% mortgage, but you will have to pay the insurance premium.

    A 90% mortgage for 30 years will have to pay a one off premium of 3.55% of loan amount. If you can manage 20 years, then the premium is 2.98%.

    85% mortgage for 30 years = 2.4%. 20 years = 2.15%

    80% mortgage for 30 years = 1.65%. 20 years = 1.4%

    And it keeps getting lower down to 70%, where you pay nothing.

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  8. #8

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    I just got a 95% mortgage. And yes, I paid 10% deposit - 5% when my offer was accepted, the other 5% two weeks later when signing the formal sales and purchase agreement. When the 95% mortgage comes through 5% of it comes back to me. You/your agent might be able to talk the vendor into accepting just 5%, there's no legal requirement to pay 10%, it's purely just that it's the done thing here...

    From my (pretty exhaustive (and exhausting!)) talking to banks a month or so ago, none of them were offering above 70% in-house. SCB used to, but not anymore.

    The insurance premium if you go through HKMC is added to the tenor of the mortgage so in terms of monthly repayments the extra amount is tiny...for me that was preferable to waiting years to have saved another several hundred thousand to reduce the MIP by a couple of thousand. Also, if it's your first purchase with the MIP then you get a discount. Just to give you an idea - I've bought a little place for $1.76m and the HKMC MIP is $60,000 which really isn't that much in the grand scheme of things.

    Hope that helps...

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  9. #9

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    PanAsia 99% Mortgage?

    Quote Originally Posted by ArKay:
    the extra amount is tiny...for me that was preferable to waiting years to have saved another several hundred thousand to reduce the MIP by a couple of thousand. Also, if it's your first purchase with the MIP then you get a discount.
    Thanks again..

    The insurance premium isn't as bad as I thought initially. ArKay - When you put it like that I totally agree. Do you know what the discount is for first time MIP'ers?

    Has anyone heard of PanAsia? I came across them today, and they appear to offer a 99% mortgage. They do however have a handling fee of (I think..) 3.4% which is similar to the HKMC rates. There is no mention of HKMC/MIP on their website, so It seems like they are offering 99% off their own back, if you pay their handling fee that is.

    I thought the HK Gov had set a 70% mortgage maximum which lenders can offer, with HKMC as the only way you can increase beyond 70%?

    Any info re PanAsia would be really helpful
    Last edited by kryzlowski; 11-01-2010 at 12:17 AM.

  10. #10

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    Just checked the document the bank sent me re the discount and it doesn't say exactly what the discount is. It was only introduced in December - about 2 days after I applied for a mortgage so there's not much info around about it yet. Calling HKMC would be your best bet.

    Also - having just looked at the declaration I had to sign for it I see I got my facts a bit wrong - sorry! It's not first time buyers exactly, it's for anyone who hasn't owned a property in the last 5 years. But also, it seems it's only available for purchase of properties below the $2mil mark.

    Haven't heard anything about PanAsia so can't help you there I'm afraid...

    Last edited by ArKay; 11-01-2010 at 09:06 AM.

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