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The long-missed 100% mortgage plan

Developers have again offered 100% mortgages for new developments, attracting scores of citizens waiting to get onto the property ladder and inciting heated debates online.

I have personally come across a similar opportunity that is hard to come by. During the SARS epidemic in 2003, the local economy crashed, and the real estate market hit rock bottom as a result. Prices were so unbelievable that in some cases mortgage payments would cost less than monthly rentals. The majority of Hongkongers lacked the courage to get onto the property ladder; it even became common for parents to warn their children against seriously dating partners who were paying off mortgages, for fear of ending up with shared debt after marriage. Back then, a project in Kowloon Tong, 1 Beacon Hill, was selling for only HK$6,000 per square foot yet still failed to stir up much interest. To increase buyers’ confidence, the developers arranged a zero down payment plan, in other words, a true 100% mortgage plan in which buyers do not need to fork out a down payment. The intricacies of the loan were all legal, and as long as the potential buyer had the financial capability to pay on time, they can become a home owner. Unfortunately, I needed a reserve of funds to maintain normal operations in my company, thus missing out on this rare opportunity to profit without giving much, watching as acquaintance after acquaintance with daring natures and a good eye placed their bets. Sure enough, a year later, the property market recovered, aided by the mainland, and my friends won their gamble with considerable returns. Since then, I have kept a close eye on 100% mortgages, for no other special reason than also trying to be part of the group that gained without loss.

It is common knowledge that Hong Kong’s property market has become rather quiet; under the looming threat of the trade war and incessant interest rate hikes, Hongkongers are having trouble finding the nerve to buy. To overcome the impasse of a stagnating market, developers have arranged a ‘Ten for Ten’ mortgage plan. This sounds similar to the aforementioned 100% mortgage and calls to mind the zero down payment plan of yesteryear. Upon closer inspection however, I believe experienced investors will not subscribe to this plan. Although it includes three years of interest-free payments, buyers need to first fork out an administrative fee equivalent to 5% of the unit price. This is an unnecessary burden which would not sit well with those who already have strong finances.

My guess is that these plans mainly target younger adults who would otherwise have to rely on their parents to buy a house. As acquiring the down payment only requires a further advance on mortgage, this is a good way to resolve the issue of parents’ refusal to aid. This is largely different to the 100% mortgage plan—be sure not to mix the two up!