Posted by
dannyboy77
16 yrs ago
I've got a couple of options with my mortgage and would like to get some advice on which looks the better deal:
Option 1
Hibor rate + 0.7%
Cash rebate of 0.5%
Option 2
Prime - 2.9%
Cash rebate of 1%
I've only ever had mortgages based on the prime rate before so not sure which looks the better deal long term
Any advice would be appreciated
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Is there an upper limit (or cap) to the Hibor rate (option 1)?
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Then it's your call. If you think that rates are staying low for a long time, you go with option 1; if you think that rates are going up soon (and will make HIBOR rates extremely high), then option 2.
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Thanks for your comments.
I think I'll probably go for the prime based mortgage as I'm looking for something more stable.
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Some of the bank have HIBOR with trackker function. i.e. if the inter bank lending rates goes crazy, the HIBOR reverts back to a preset prime minus rate. This is potentially a god deal.
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I have also been thinking about this for quite some time now and it is very likely that I will choose HIBOR over prime based mortgage.
HIBOR is at an all time low. I am not sure if it will increase dramatically over the next 1-2 years. If it did, in 3 years time, I have the option to re-mortgage. My penalty is only 0.5% of the remaining loan value in the third year should I wish to do it sooner although we probably wouldn't.
The other consideration is that our monthly repayment with prime rate is around HK$12k. If HIBOR is at cap, it would be HK$13,600 per month for us, if at current rate, it is HK$10k.
If we select HIBOR and put HK$12k in the bank each month instead of HK$10k, this could act as a buffer if HIBOR hits the cap and we are not paying that extra 2k to the bank in interest (for prime based mortgage).
If this is the case, isn't HIBOR a better deal?
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GemmaW, by the time you re-mortgage/refinance, the P-2.9 or P-2.25 offer most probably will be gone. Think about it, by that time if P=10%, how much will be your monthly amortization? In this uncertain times, you need to consider the worst case scenario.
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hi punter, so i hve the same dilemma...so, i was thinking the same. Either way you're gng to be screwed right? if Hibor goes up, then the Prime Lending rate will go up too? so, if u had a mtgage of Hibor + margin which you can switch to P - margin, the bank is gng to win...cos if Hibor goes up, P lending rate will go up too right?
what to do...what to do.
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jon, I said the same thing to my banker at lunch today. Prime rate will go up too. At the end of the day, the banks will not want to lose out.
I'm still contemplating the same. Which mortgage to take. I'm more in favour of HIBOR but I am of course not totally certain this is the way to go hence seeking more advice here.
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Hibor changes constantly that's why HIBOR based loans usually will get the month's average. Prime Rates changes relatively slower compared to HIBOR.
In an above comment I made, you basically have to "bet" on where rates are going.
If you're like Danny who opted for "stability", you can choose the P based loan. But if you want to "play" the rates a little bit, you can choose the HIBOR based loan and enjoy the low rates now. You're not going to be pounded heavily even if rates goes to the roof because there's that cap of 2.25%. So the difference is just 65 percentage points (about 1K+ per month difference in amortization).
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tpol
16 yrs ago
Hibor going up does not necessarily mean P will go up.
In principal if the US Raised rates, both will go up, possibly.
However, during the crazy days of IPOs, the Hibor would shoot up as people are in excessive demands for HKD, thus, borrowing costs rises.
After the IPO, the Hibor goes back down so if you were unlucky in that your Mortgage Date occurs during these spikes, then you will be hit with a High interest rate for the month. If you were on the P loan, it most probably would not change.
Another occurrence is if someone attacks the HK dollar again. That will drive the Hibor up as well.
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I had to consider last year as well, eventually opted for the Prime option, mainly for sake of peace of mind and more certainty.
- because P is more stable than Hibor, for the past half year, P has never been changed, but Hibor has been going up and down, it can be very different overnight. even when P is changed, it doesn't go as drastic and as fast s Hibor. it gives you some peace of mind when you know how much you will need to pay next month.
- true that I can revert to other offers 3 years later without penalty, but would I be able to get as great deal as now? not too long ago earlier this year, banks were offering only P, P-1 rates only. The rates now are quite historic low, don't presume you can always have this open. Also if property price fall, you might not get enough valuation to re-mortgage in other banks for different rate. Earlier this years, some buyers have to forfeit the deposit because they can't get mortgage.
Mortgage is a long term thing, if you are able to get a historic low P minus rate, by all means seize it.
- Banks calculate everything well so they can make the best deal out of us in the market, i think they are selling this Hibor mortgages because they are not too happy with the low P. so I would think the room for the bet to win is not too high, even if you win, I would suppose the gain won't be as good as the certainty you are getting with a P rate in the next 10 years or so.
or,
Option 3:
i just read from the news the china bank of communication is offering the best rate in town, P-3.25, with the actual rate 2%, probably better than option 1 and 2.
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Hi Banankingdom,
Funny that you should mention. I was just coming back to the threads to say that I have taken up Bank of Communication's P-3.25 offer.
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