Posted by
kyander
13 yrs ago
Hi looking at buying a flat under 6m, we were going to put down 10% but the HKMC still have the ability to not approve it, so we could lose our money, and we dont want to risk that. so then the mortgage broker said get 30% in personal loans to make a 30% down payment so the HKMC don't need to get involved and the lend the remainder from the bank. This is no problem for us to get, but I am not sure, it was my understanding that if you put down 30% it can not be borrowed. This is our first time buying and we are not sure if there are any pitfalls that we need to be aware of. Please advise if this is the case, also advise anything we need to be careful of, my husbands company pay off the loan at 3 times the required amount so no problem there just not sure about it all. If we do lend the entire amount, and the property falls from 6m to say 5m would the bank insist on top up money?even if we are paying it off at a much greater rate than needed? Thanks
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So is it ok to lend the 30% in a personal loan from one bank and get the rest of the mortgage amount from another, is this allowed, as there is no other way to get the 30% unless we lend it.?
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Kyander. My understanding is that it can be borrowed but at the same time the bank will take all loans into consideration and look and your ability to repay. It will also factor in an interest rate increase (of 2% I think) as a kind of stress test. All loans and mortgages after the stress test shouldn't come to more than 50% of your salary. Obviously, the extra 20% you borrowed will be cheaper if you take the trouble to go via the HKMA because the HKMA is a government-backed entity so less risky for the lender. Also, and this is very important, check to make sure the price you have agreed to pay for the property is at least equal to the valuation. If not, then you must pay the difference (ie if the bank values it at 2m and you buy at 2.2m then you need to find the full 200,000 dollars in addition). The simplest way is to go into a branch of HSBC and speak to the mortgage people there and get them to go through it. If you don't understand, ask someone else. If you still don't understand then hire a lwayer to explain.
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Thanks a lot that answered my questions we have all the valuations already and have the ability to pay all loans no problems so it should be ok. Thanks a lot for your help.
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Walkup2- are you saying that lending the 30% is not really legal?
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Kyander. Go and talk to the people at HSBC. Getting your info from message boards is not a good idea given the amount of money involved. My understanding is that you need to find at least 10% if you are going via the HKMC. There will be some restrictions such as having to live in the property and not renting it out, not a village property (though there is a scheme for this I think), having a full-time job in HK. The HKMC will then guarantee the extra 20% of the Valuation or the price (whichever is the lower). The bank will look at all your income, your loans - including the current mortgage being applied for and factor in an interest rate increase. If all the loan repayments plus the interest rate increases come to less than 50% of your total monthly salary then there should no problem. Don't panic about the HKMC. They will approve it as long as you meet their criteria. HKMC is the cheapest way to go if you intend to live in the property. ANyway, speak to HSBC not me.
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My understanding that fully financing the entire mortgage is not kosher. So the bank would not likely allow a 30% private loan and a 70% mortgage, effectively meaning the client has put zero down. When obtaining a mortgage, the bank will specifically ask you how you are financing the downpayment, i.e. family borrowing, personal loan, private savings, etc. This influences the banks decision to lend to you.
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Yes. You need to put down at least 10%.
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As said before - the HKMC REQUIRES that the 10% you put down is not borrowed but you down cash. If you borrow this outside of HKG they won't know and its not a problem. They the guarantee the other 20% loan and the bank gives you a mortgage for the remaining 70 %.
If you go only to the bank you will again get a 70% mortgage and the 30% deposit you must come up with any way you can. If you borrow all of it in HKG the bank will most likely find out - this may or may not be a problem depending on the bank judging you ability to repay. You won't be able to borrow the 30% from the same bank that gives you the mortgage. If you borrow it in various loans/credit cards etc from different banks you will be reuiqred to disclose this on your mortgage application - so the will know. This is sometimes accepted and sometimes not. The people at the banks are all aware of how this is done - so if you actually talk to them openly about how you plan to do it they will tell you if they can accept it or not - they are there to help you get around these requirements - which are government rules - not bank rules. SO talk to more than one bank and see what they say.
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