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Mortgages and Other Financial IssuesBack to top Back to main Skip to menu
Hong Kong - Mortgages and Other Financial Issues
If you’re buying an apartment then it helps to check to see if you should buy your own individual policy for your apartment or if the building management company has a block buildings policy. If so, then your contribution to the premium should be included within your monthly management fee. Even if there is a block policy in place, it is still suggested that homeowners have insurance covering both the building insurance and contents insurance just in case. If the building management company holds a block policy, you must check the exact terms and scope of the policy to ensure that your contents policy covers the rest.
Your home insurance policy should cover the full reinstatement cost of your apartment in cases of damages; contents in events of theft, fire, water damage, floods, etc.; and personal liability coverage. You might also want optional coverage including insurance for personal effects that you often travel with, alternate accommodation expenses, locks replacement, domestic helpers insurance, etc.
It is imperative to check your policy to see if there any exclusions and to find out what your insured limits are. HSBC, for instance, offers a home insurance policy that covers protection or your belongings, up to HK$10 million in personal liability protection, upgrades to energy efficient appliances, and even an extra 50% coverage during major holidays such as Christmas. Exclusions could include properties in or on patios or terraces, loss or damage due to war or sonic bangs, thefts from unattended vehicles, and theft in your home if any part of it is rented out.
Mortgages are available to foreigners in Hong Kong. You must, however, be aware that it is very rare to get the entire cost of the property’s value covered. In most cases, a mortgage is only available for 70-90% of the cost, although in some instances it might cover 95%. The Hong Kong system of property transactions is based on the UK version. Costs include the broker fees of between 0.5% and 1% of the price; a deposit of 5% payable on agreement in principle, and another 5% two weeks later; stamp duty of 15%; and solicitor fees, usually about HK$6,000.
Under Hong Kong law, banks and mortgage companies cannot extend mortgages greater than 70%. The further 10 - 25% of the mortgage must be obtained from the Hong Kong Mortgage Corporation (HKMC). As such, a premium is paid to the HKMC. The HKMC imposes certain terms and conditions on the money lent. These conditions are not to be confused with obtaining bank consent under the 70% mortgage that is borrowed. Lenders generally lend 50% of the borrower’s income and will rarely lend more. Most borrowers try to ensure that their mortgage payments are less than 40% of their income.
The bank will first do a property valuation. If the property is something that they aren’t interested in, such as old apartment buildings that lack elevators, then they might place the valuation very low so that you’re not interested in going with them. They will then check your repayment projections. This will include going over your projected mortgage payment and other fixed monthly payments you might have. Lastly, they will do a credit check.
Property tax is owed to the government on any property you own, whether you rent it out or live in it. It is important to keep sufficient records when it comes to rent received for at least 7 years. You should also complete and submit a tax return for rental income. Property tax is computer on the net assessable value of the property for that year.
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