With the continuous expansion and integration of the Greater Bay Area, several Hong Kong banks have recently introduced new mortgage services that aim to help local clients obtain mainland mortgages or refinance their existing properties in Mainland China. As the city is in the midst of an economic downturn, some clients have been enquiring about the possibility of cashing out funds from their real estate in the Mainland for more liquidity. If you’re thinking about the same thing, here are a few things you need to know before refinancing your property.
Currently, these refinancing services are applicable to properties in many first- and second-tier cities, such as Beijing, Tianjin, Shanghai, Guangzhou, Shenzhen, Panyu, Zhongshan, Shunde, Fuzhou and Quanzhou. The types of real estate include residential homes, apartments, commercial-residential properties, office spaces, shops and car parks, however the mortgage for the property must already be paid off.
To apply for refinancing, the applicant has to be a permanent Hong Kong resident and in possession of the property ownership certificate of the real estate they wish to remortgage. The criteria, similar to the mortgage policies of the Hong Kong Monetary Authority, mainly looks at the applicant’s debt-to-income ratio, stress test results and credit report. In addition, the applicant needs to provide a number of certificates and paper work to the bank. These include but not limited to Hong Kong ID, Home Return Permit, proof of address, bank statements from the last three months, proof of salary and the ownership certificate of the property. If you have other mortgages in Hong Kong, you will also need to present your mortgage payment record from the past six months, your monthly mortgage payment table and proof of assets from the past month.
As for interest rates, the effective mortgage interest rate is a whopping 6% for those applying for mortgages in Mainland China, however, you can get the rate down to 3.5% by applying through Hong Kong banks. The bank will give a valuation for the refinanced property, and the LTV ratio is up to 50%, with the total loan amount capped at HK$50 million. The maximum mortgage term is 30 years for residential properties and 15 years for non-residential real estate. The combined number of the applicant’s age and the mortgage term cannot exceed 70 years. In addition, the loan will be calculated and paid in Hong Kong dollar, which helps the borrower avoid the risks of currency exchange rate fluctuations.
It’s important for potential remortgage applicants to know that due to the current pandemic, the application process may take longer, therefore it’s advisable to reserve two to two and a half months time for the application process. In addition, most applicants, apart from liaising with the Hong Kong branch of the chosen bank, will also have to visit the bank branch and the law firm that represent you in the Mainland to go through some procedures (a few banks are able to make arrangements with designated law firms to handle the legal paperwork on your behalf). The plans, promotional offers and scope of services vary from bank to bank, so it’s always wise to shop around or seek assistance from professional brokerage firms before making a decision.