【#新手教】Mortgage Term Dictionary (Part 1) | Hong Kong 香港



The process of buying a property and contracting a mortgage is complicated, and just hearing a lot of terminology is enough to make the first brothers in various locations dizzy. In this episode, we will disassemble common mortgage terms for everyone! How much money the appraising bank is willing to lend is based on the bank’s appraisal of the property. For example, the transaction price of a unit is 8 million yuan, but the bank’s valuation is only 7.5 million yuan, and the bank can borrow up to 90%, that is, 90% of the estimated value of 7.5 million yuan, which is 6.75 million yuan. The bank’s valuation will continue to change with the property market and economic environment. In a weak market, the bank will lower its valuation. Therefore, it is best to check with the bank for the latest estimate before buying a property. Mortgage ratio Mortgage ratio refers to the percentage of the property price that the buyer borrows from the bank or its financial institution. According to the provisions of the HKMA, different residential property prices have different maximum mortgage ratios. Taking first-time buyers as an example, mortgage insurance can be applied for properties of 10 million yuan or less. Among them, properties of 8 million yuan or less can borrow up to 90% of the property price, and properties of 9 million yuan or more to 10 million yuan can borrow up to 8 to make. For the increase in mortgage or the use of units for renting out, the bank will also lower the mortgage ratio of the property accordingly. As for subsidized housing, applicants for HOS Green Form can borrow up to 95%, while White Form applicants can borrow up to 90%, and Housing Society-assisted housing can borrow up to 90%. If it is a first-hand property, the developer may provide a higher percentage of mortgage loans, such as 70%, 80%, etc., but the interest rate will be higher than the market. Contribution to income ratio Before bank loans, the applicant’s repayment ability must of course be considered. The bank will calculate the applicant’s contribution to income as long as the monthly repayment amount is less than or equal to 50% of the monthly income. . Assuming that the monthly repayment amount is 10,000 yuan, the applicant’s monthly income must be 20,000 yuan or more. However, if the applicant’s income is not fixed, for example, the real estate agent’s monthly income is mainly from commission, the bank may discount the income. The specific method depends on the individual organization. The stress test is based on the low mortgage interest rates of banks in recent years. The HKMA fears that interest rates will rise in the future and a large number of repayers will be unable to repay. Therefore, mortgage loan applicants are required to perform stress tests. Based on the current main mortgage interest rate of 2.375%, the stress test assumes that after the bank raises the interest rate by 3% to 5.375%, the monthly repayment amount shall not exceed 60% of the applicant’s current income. If the applicant already holds a property or more, the relevant stress test requirements will be increased. After the interest rate is raised by 3%, the monthly contribution shall not exceed 50% of the applicant’s current income. TU report The TU report is the Union Credit Report. The bank will check the applicant’s credit report before approving a mortgage loan. The relevant report will record the applicant’s credit activities, including loan amount, repayment history, whether there is a default or bankruptcy, etc. Credit ratings are divided into A to J. Generally speaking, A to C are the best, D to H are qualified, while I and J are unqualified. Too low a rating will affect the chances of loan application. HIBOR refers to interbank interest rates and inter-bank loan interest rates. The website of the Association of Banks publishes interbank interest rates every working day and is divided into 8 periods from 1 day to 12 months. P is called Prime Rate. If an applicant applies for P, the mortgage interest rate is calculated based on “P+X”, X is fixed, and P will be added or subtracted due to the banking market. If a bank borrows at a fixed interest rate, the interest rate will remain unchanged throughout the repayment period. Floating rate H and P are both floating rate, which will increase or decrease in response to bank market conditions. In the next episode, we will disassemble other common mortgage terms for everyone! 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