How do mortgages work in HK

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  1. #1

    Join Date
    Aug 2008
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    How do mortgages work in HK

    Hi all,

    I wonder if you could fill me in on something that has been on my mind for a while.

    Say for e.g a mortgage on a property it HKD 2mil, with this amount the repayments are like 10-15k per month. If this is the case, how to landlords rent it out for like 6-7-8k per month?

    Maybe I am missing something?


  2. #2

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    The repayments on $2M would be about $10K, but most mortgages are only 70% or less of the property value, and many landlords invest for capital appreciation, not solely rental income.


  3. #3

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    over how many years? for a 2m property, a 70% mortgage over 20 or 25 years is perfectly manageable.

    And as PDLM mentioned. rent is not the only profiteering part. remember, as they are paid rent, they still own the flat.

    example.

    landlord buys flat for $2m

    10 years of rent at $8k per month = HK960k

    Sell Flat for $2m

    Profit = HK$960k - repairs, expenses, agent fees etc etc.

    ... and that is if the property does not appreciate in 10 yrs.

    It seems for alot of landlords, they are the older members who have already paid for their flat, but want to move to somehere bigger, and have a job to pay the new mortgage so any rent from the old property is purely a bonus.


  4. #4

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    Er, and minus interest on the mortgage. But the interest on a $2M mortgage is only about $4K / month currently, so you're still making money.


  5. #5

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    May 2009
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    what sort of interest rates are available? is there much of a competitive market? Do HK lenders impose any penalties on non-nationals?


  6. #6

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    Currently around 2.5%pa, Yes. No.


  7. #7

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    If you plan to buy in an older building you need to watch the age. HSBC for example calculates the longest repayment term as 50 years minus age of the building. So with HSBC you cant get a mortgage at all if the building is over 50 years. There are other banks where the term is longer. I heard up to 70.
    Furthermore you can't get more than what will require repayments of half your income.

    If you want to rent out the property you will need to get permission from the bank and the interest may be higher.

    The longest time that you can fix the interest rate is 3 years. After that it will fluctuate. So I would include some space there for safety, since there is only one direction where interest can go at present.