Posted by
GemmaW
16 yrs ago
I've been offered two choices:-
Choice no. 1
P-2.85%, best lending rate is at 5% p.a and interest is 2.15% p.a.
1% cash rebate on loan amount
Choice no. 2
1 month HIBOR + 0.78% or P-2.25% (P=5.25%)
0.1% cash rebate on loan amount
Thanks so much.
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This question was already asked at this link http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/126346/which-mortgage?/
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you could also consider an interest only loan with a seperate repayment plan, they are often the cheaper option on a monthly basis
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tpol
16 yrs ago
i have one from but for an overseas property.
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Assuming that the trends between HIBOR and Prime remain the same as they have over the past 15 years you will pay less with the Prime -2.9%.
When I purchased a place a year ago I had my staff gather the past 15 years of 1 month, 2 month and 3 month HIBOR data daily. In addition I had them gather the prime rates for each of the 3 banks I was considering over the same time period. (Thankfully my company does a lot of banking with each of the three banks I was considering for a mortgage).
As an aside note while HSBC (and its subsidiary Hang Seng) and BOC have lower primes right now it has only been a few years since banks could set their own prime. HSBC and Hang Seng immediately chose to be lower than the market and BOC only joined them maybe 3 years ago. There is nothing saying that they will always have the lowest primes. In my mind a P-3.15% offer from SCB is better than a P-2.9% offer from HSBC/BOC. Right now they are both the same effective interest rate but over the long term you are assumign that HSBC/BOC will always keep its prime 0.25% lower than the market.
After collecting all the data I then had my staff graph my effective interest rate for all the P minus and HIBOR + mortgages I was looking at. Over any length of time (meaning 5 years plus) the P minus was always cheaper.
HIBOR is much more volatile than prime and while when interest rates are falling HIBOR plus is cheaper in periods of steady rates or increasing rates P minus was cheaper. (With the massive increase in money supply in Hong Kong HIBOR is artificially low right now relative to prime - a case that connot exist in the long term).
I was lucky that I had both access to the data I needed and staff that I could ask to help me out with this (yeah it was an abuse of power but some of the people working in my Treasury department were interested in the answer themselves). Regardless based on the past 15 years (up to last summer) prime minus (using p - 3.15%/HSBC P - 2.9%) was significantly cheaper than HIBOR + 0.5% with a Prime - 2.25% cap.
While I have not looked at mortgages in the past year check out the language for the cap on the HIBOR + mortgages. For some banks if you utilized the cap feature your mortgage switched to a P - 2.25% mortgage going forward once the cap was hit so in essence you only had HIBOR + for a while which then switched to a less attractive P minus mortage. Other banks would calculate if p-2.25% was cheaper each period and then charge you the lower of p-2.25% or Hibor. (P-2.9% was still cheaper).
Also pay attention whether they are using the 1, 2, 3 or 6 month HIBOR rates. Generally speaking using the 1 month rate will be the cheapest option.
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I had the same challenge and went with HIBOR +.8% last month (no staff to help but did have some graphs... just not very accurate unfortunately). One reason is that at the time the best I could get from HSBC was P-2.5 or 2.6. If you really can get >3 it should be worth it. The good news is that HIBOR right now is pretty damned low which is better for the early part of the loan, and I can do partial pay after a year w/o penalties. Sometimes we are spoiled for choice here...
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anyone know what the highest Prime lending rate has been in the last sy 3-4 years? cos with these Hibor mortgages, I understand there is a cap at P - 2.25% (for example)..but it doesnt help if say Prime is 10%...which means your effective interest rate is still high at 7.75%
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In the time frame you are asking for the highest Prime was between March 30, 2006 and August 9th 2006 when prime was 8.25%. During that time frame 3 month HIBOR average (remember it changes daily) 4.532%.
Thus P-3.15 was 5.10% and HIBOR + 0.50% was 5.03%. In this particular time frame both P-3.15% and HIBOR + 0.50% were basically the same.
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How about HIBOR + 0 for first 3 years then HIBOR + 0.7 loan that SCB is now offereing. Would like to get ur thoughs compare to P - 2.90 loan (P is the lower Prime rate offer by HSBC and BOC).
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nek:
I would check the small print as HIBOR is the rate that banks lend to each other. It seems too good to be true that SCB is offering a HIBOR + zero option for three years without any catches. (After year three you could switch to another mortgage package). If there is no small print or hidden charges I would think it would be a great mortgage to go with and you can hopefully refinance after year three.
If you are looking at P-2.90 from either HSBC or BOC I would consider P-3.15% from SCB, DBS or BEA as you have the same effective rate right now but in the future HSBC and/or BOC may not have lower prime rates than the other banks. (Although HSBC/Hang Seng are more likely as their deposit base in Hong Kong is far larger than anybody else. There is a HUGE drop off to BOC and then a sizable drop to SCB and then there is a big drop to DBS/BEA and everybody else).
I took my mortgage out last July and at the time decided that to go with SCB and got P-3.15% and 0.80% cash back. I had exactly the same offer with DBS and an equivalent with BOC (P-2.90% and 0.80% cashback). The HIBOR offers were all over the place but the best was HIBOR + 50bps and DBS had the best cap, SCB's was terrible because if the cap was ever hit the mortgage changed to a straight P -2.25% for the life of the mortgage.
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Is there away to post files to this board punter? Unless I am missign something I don't think I can attach an excel file to a post?
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I guess not. Can you cut and paste, maybe? Paging Ed, how can we do this?
If you have a place in the web somewhere then you can post the link. Or maybe scribd.com, I don't know...
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Ed
16 yrs ago
Sorry but we are not set up to post a file on the forums - perhaps you can pass around via the messaging system.
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Iamexpat, you can load it at scribd.com and share the link here. I have not tried it myself but it seems okay.
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Re: that HIBOR+0% from SCB... you have to read the fine print. What they do is take the amount you would have paid H+whatever for the first three years and distribute evenly over the monthly payments. They say you pay off the principle faster and there is no penalty for repayment (except that you have to pay back the interest margin you WOULD have paid). Otherwise over the life of the loan it's almost the same. In fact compared w/ just conventional HIBOR you will be ahead of the game after three years as far as money you actually owe the bank (principal + three years of interest margin). It's truly "pay me now or pay me later"
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Hi all.
After much consideration, my husband and I have decided to go for the P-3.25% (2% interest) with 1% cash rebate offered by Bank of Communication.
We were going to go for HIBOR initially after comparing all the offers but found another bank which offered quite a good prime rate deal.
Historically, I think banks have offered up to P-3.3% but I don't think it got any higher than that? We don't think the rates would fluctuate too much from P-3.25%, probably only plus or minus either way? In any case, P-3.25% is one of the lowest offered to date so for stability purpose (seeing we do intend to live in the premise for a long time), this would be a better option for us. Having said that, we are locked in for a period of 3 years, third year penalty is 1%.
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i want to buy a proporty in lantau ....who can recommend a bank for a mortgage loan
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Cruz, I have also been mortgage shopping for the last few weeks.
PRIME
The best P minus rate for mortgages over $10m is HSBC at P-3% (i.e. 2%), 1 year penalty, 1% cash back (to be paid back if terminated in the 2nd year) . For mortgages below $10m, the best prime rate is BOC, which offers P-2.95% (i.e. 2.05%), 2 year penalty, 1% cash back.
HIBOR
The best HIBOR plan is by DBS, which is H+0.7%, prime cap is P-2 .75% (i.e. 2.5%) and cash rebate is 0.6%.
Loyd, was right, the above three banks are the best and to get the best deal you have to walk into their branch. Don't use a mortgage broker (rates are worse! I suspect the broker gets a kickback).
With HSBC I had to bargain with them, as their opening offer was (like you said) 3-3.5%. I told them I would go to BOC and they dropped their rate the following day.
I also checked with SCB, ICBC, Wing Hang, BEA, BOCOM and they still can't beat the above.
Hope this helps.
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Got following Quote today;
Interest rate : 1 month Hibor + 0.7%, cap at P-2.75%
Cash rebate : 0.6%
Any downside with the Hibor and the cap ceiling ?.
(have not got the fineprint yet and still shopping around and comparing with the prime option).
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Prime as follows;
--
Plan A: P-3.25% with 1% cash rebate and no penalty (return cash rebate if redeem within 3 years)
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