The rental market remained robust in 2026. According to the Rating and Valuation Department, the property price index reached 301.4 in January 2026, marking a 0.5% month-on-month increase. This index has now risen for eight consecutive months, with a cumulative increase of 5.2%, hitting its highest level in over 18 months. With rental yields at attractive levels, many property owners have begun considering renting out their units.
Under current regulations, the maximum loan-to-value (LTV) ratio for rental properties is 70%. To qualify for a higher LTV mortgage, properties must be owner-occupied and insured under the Mortgage Insurance Programme (MIP). If an owner misrepresents the property's purpose and rents it out without declaring, they could face criminal charges for submitting false information.
For owners who initially obtained a high LTV mortgage but plan to rent out their property, they must first apply to their bank for the removal of MIP coverage (“release the MIP”) and notify the bank of their intention to rent out the unit. How can MIP coverage be removed? This process requires the outstanding loan amount to be reduced to 70% or less of the property's current valuation. Once fulfilled, owners can apply to their bank to switch to a standard mortgage.
In such cases, some owners opt to handle this through a refinancing process, while others apply directly through their original bank. Regardless of the method chosen, owners should first confirm if their current mortgage is still within a penalty interest period. If it is, making early changes to the mortgage terms or refinancing may incur additional fees.
Furthermore, since August 2024, the Hong Kong Mortgage Corporation has allowed eligible property owners, under specific circumstances, to apply through banks for exemptions from owner-occupancy requirements, enabling the property to be rented out. These circumstances include, for example, changes in housing needs due to the birth or adoption of a child in the owner’s household.
If a buyer purchases a property with the intention of renting it out, the rental income can typically be factored into their income calculation when applying for a mortgage. Even if the property has not yet been rented out, banks may estimate the market rental value of the property and include a portion of the projected rental income in the applicant’s income assessment, thereby reducing the income requirement for the mortgage application.
In general, when applying for a mortgage, banks require applicants to provide proof of income to evaluate their repayment ability. For buyers planning to purchase properties for rental purposes, if the property comes with a stamped tenancy agreement, the applicant can submit this agreement to the bank as proof of rental income. The agreement must clearly state the monthly rental amount. During the review process, banks typically include 70% to 80% of the actual rental income in the applicant’s income calculation.
For properties that are not yet rented out or sold without an existing tenancy agreement, as there is no documented rental income, banks generally estimate the rental value based on the property’s market rental rates. They often include 60% to 70% of the projected rental income as part of the income calculation. However, since this projected rental income is based on estimates, banks tend to be more cautious during the approval process.
It’s important to note that different banks adopt varying methods for calculating rental income or estimated rental value and may accept different percentages of the income. In addition to considering rental income, banks also evaluate other factors such as the applicant's repayment ability, the quality of the property, its market price, and the loan-to-value (LTV) ratio to determine whether and to what extent the rental income will be factored into the final approval.
