Must-read for Property Buyers: Requirements for 90% First-time Mortgage Applications

As property prices continue to soar in Hong Kong, first-time homebuyers make up a significant portion of the market. After the government raised the maximum mortgage ratio for first-time homebuyers, applying for a 90% mortgage has become a popular choice. If you are considering a 90% mortgage, it is essential to understand the relevant application conditions and common issues.

 

1."First-time Homebuyers"
No prior ownership of any residential property in Hong Kong
To apply for a 90% mortgage, the mortgagor must be a "first-time homebuyer," meaning someone who has not owned any local residential property. The term "first-time" does not necessarily mean that it is the first property purchase. As long as there is no prior ownership of any local residential property when applying for the mortgage, one can be considered a first-time homebuyer.

 

Non-residential property ownership also counts as first-time purchase
If the mortgagor owns non-residential properties such as parking spaces or office units, they can still be considered a first-time homebuyer as long as they do not own any residential property.

Upgraders also qualify as first-time homebuyers
Upgraders, i.e., those who sell their existing property before buying a new one, can be considered a first-time homebuyer as long as the sale transaction is completed before purchasing the new property. It is worth noting that if one upgrades within 36 months, additional stamp duty must be paid.

 

2."Fixed-income Employees"
To apply for a 90% mortgage, the applicant must be a fixed-income employee, with the primary income source from the local region. A fixed-income employee refers to someone with stable income. If the applicant's salary is mainly paid in the form of commissions or cash, and the base salary is insufficient, the maximum mortgage that can be borrowed is 80%, the same as non-first-time buyers. If the income is from overseas, evidence of a close connection with Hong Kong is required. For example, being employed by a local employer, having direct relatives settled in Hong Kong, or having a chance to borrow a 90% mortgage.

 

If you do not meet the above conditions, you can still apply for a mortgage, but your borrowing limit may be lower.

 

3.Payment-to-Income Ratio (PTI) - Payment cannot exceed 50% of income
If you are a first-time homebuyer applying for a 90% mortgage, your payment must not exceed 50% of your personal or family income. This is a basic requirement, also known as the payment-to-income ratio. For example, if your household's monthly income is HKD 100,000, your payment cannot exceed HKD 50,000 per month.

 

Apart from the base salary, if you have other similar benefits, such as bonuses or double pay, as long as they are stipulated in the employment contract and have been reported for tax purposes in the past, they can be included in your income. Generally, the average of the past two years is used to calculate the payment-to-income ratio.

 

It is important to note that the payment-to-income ratio is calculated based on the total repayment amount of the loan, including both the principal and interest. In addition, other expenses, such as mortgage application fees, stamp duty, and legal fees, must also be considered.

 

4. Property value over HKD 6 million must be a completed property
If you want to borrow a 90% mortgage to purchase a property, and the property value is HKD 6 million or below, it can be either pre-sale (to be completed within 12 months) or completed residential property. If you want to buy a property worth over HKD 6 million, it must be a completed residential property, also known as a "second-hand" property.

 

In addition, different property values have different maximum loan-to-value ratios. For properties valued at HKD 10 million or below, the maximum loan-to-value ratio is 90% (up to HKD 9 million); for properties valued at HKD 19.2 million or below, the maximum loan-to-value ratio is 80% (up to HKD 9.6 million).

 

It is important to note that the above conditions include mortgage insurance schemes. In addition, if you want to apply for a 90% mortgage, you need to meet other conditions, such as being a fixed-income employee and not exceeding the payment-to-income ratio of 50%.

 

If you are a property buyer considering a 90% mortgage, in addition to meeting the requirements for first-time homebuyers, you also need to pay attention to the property type and price limit. For properties valued at HKD 6 million or below, it can be either pre-sale or completed residential property; for properties worth over HKD 6 million, it must be a completed residential property. Moreover, different property values have different maximum loan-to-value ratios. In addition to the above, other conditions must be met, such as being a fixed-income employee and not exceeding the payment-to-income ratio of 50%. We hope that this article can help readers understand the relevant conditions and requirements for applying for a 90% mortgage.