Posted by
dabuchuet
16 yrs ago
Hi can someone please help?
i bought a flat not too long ago in HK. and i bought it from a developer with only 10 percent down.
the mortgage company covered 70 percent. and insurance company covered 20 of purchase price.
As it is difficult to sell now, i wanted to rent the flat but the broker advised me that i could not rent out because i would then be breaching the mortgage agreement, as i have bought it for own use as opposed to investment property which requires 30% down. He said, if i tried to rent it out the Mortgage company will take all my initial down payment as penalty. Is this true?
I dont understand what the difference is and why i am not allowed to rent it out. please let me know someon whether this is normal practice by mortgage company to check and penalize people who have own use mortgage but decides to rent.
desperate owner.
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lace
16 yrs ago
Agree with LGiMV - you signed in your mortgage agreement that you bought the flat for your own use. I know the details because we did exactly the same. This is the condition under which you got the 90% mortgage.
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thank you all for the candid replies. this helps everyone, including myself assess what the right thing to do is. and the right thing to do is pay the mortgage and not breach the mortgage agreement. its tough but i guess we all have to pay the price for greed. thank you
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How would the banks find out if your renting your apartment on a 90% mortgage? I agree that it's best not to breach the agreement, just curious as to how they would find out.
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hi dabuchuet,
have you considered moving in the new flat instead, and rent out the existing one that you are occupying?
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Under Hong Kong law, banks and mortgage companies are not allowed to extend mortgages greater than 70%. The further 10 - 25% of the mortgage has to be obtained from the Hong Kong Mortgage Corporation (HKMC), and a premium has to be paid to the HKMC. The HKMC will also impose certain terms and conditions, one of which is that "at least one of the borrowers must physically live in the property" - see "Owner Occupancy" under http://www.hkmc.com.hk/eng/pcrm/ourbusiness/Annex-7-English.pdf
Based on my discussions with my bank, this condition is unlikely to be waived by the HKMC unless the circumstances are extenuating, e.g. borrower passed away.
You should not confuse this with obtaining bank consent under the 70% mortgage that you borrowed. This is a HKMC issue.
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bing2
16 yrs ago
i know many landlords rented their apartments while under 80 - 90% mortgage. banks dont check they just send you letter. make sure you forward their letter to where you live and remember to reply to their letters. give the bank your mortgaged property address but forward all letters/ mails to your "real" home address, and also try not to stamp duty your rent agreement. many tenants will agree with this. still if you stamped duty your contract, banks will not check as well. just answer their letters. banks wont find out and they dont have time to go to your place knocking on your front door to see if you live there.
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