Hong Kong Mortgage FAQ Complete Guide

1. Mortgage Brokers & Cash Rebates Broker vs Walk-in

Q1: What's the difference between using a mortgage broker and applying directly at a bank (walk-in)?

In terms of interest rates, banks are theoretically required to treat all customers fairly according to HKMA guidelines, regardless of whether you use a broker or walk in directly. However, professional mortgage brokers are familiar with each bank's latest promotions and approval preferences, and can:

• Compare mortgage plans and maximum cash rebates across multiple banks;
• Recommend banks more likely to approve based on your income structure and occupation;
• Help organize and pre-check income documents to reduce back-and-forth;
• In some cases, provide additional cash rewards on top of bank rebates.

Q2: How does the "1% rebate limit" work in practice?

The HKMA stipulates that cash rebates provided by banks to mortgage customers, including other monetary rewards, generally cannot exceed approximately 1% of the loan amount. If the total of bank rebates plus broker rebates exceeds 1%, the bank will:

• Calculate the "effective loan amount = original loan amount - total rebates" during approval;
• This means rebates are treated as if you've paid additional down payment, rather than "free money."

2. Bank Approval Criteria & Income Verification Revolving Credit & Account Red Flags

Q3: Why do "unused" revolving credit facilities affect borrowing capacity?

Banks treat revolving credit as a form of "potential debt that could become real at any time." During assessment, they typically:

• Calculate approximately 3.5% to 4% of the credit limit as monthly payments;
• Even if you've never used it, this still increases your debt-to-income ratio (DTI);
• Opening new revolving credit facilities close to completion or document submission can turn an "approvable" case into a "rejected" one.

Q4: How do banks review salary account records?

Banks will thoroughly examine your recent months' salary account statements, paying particular attention to:

• Frequent or large transfers to sensitive merchants like betting platforms or cryptocurrency exchanges;
• Multiple unexplained large fund movements within a short period;
• Transfer records showing debt repayments to friends/relatives or finance companies.

These situations may cause banks to suspect hidden debts or anti-money laundering (AML) risks. In serious cases, they may reject the mortgage application or even request account closure.

3. Tax & Interest Deductions Be Careful with Refinancing for Cash-out

Q5: Can interest on refinanced or top-up loans for "cash-out" be tax-deductible?

For tax purposes, only loan interest used for "purchasing a self-occupied residential property" can be claimed for deduction:

• If the original mortgage was HK$4 million and you top up an additional HK$2 million for investment purposes, making the total HK$6 million;
• The tax authority will only allow approximately two-thirds (4/6) of the interest as a deduction;
• The remaining investment-related portion (HK$2 million) interest cannot be deducted from personal income tax.

The tax authority can trace back several years of records (e.g., 7 years). If past claims are found to exceed the deductible range, back taxes and surcharges may be imposed.

4. Guarantors & High LTV Mortgages Being a Guarantor Can Backfire

Q6: How does being a guarantor affect my future property purchase?

Once you become a mortgage guarantor:

• You bear legal responsibility for the mortgage, and the payment amount is fully counted as your personal debt;
• When you apply for your own mortgage later, the maximum LTV is typically reduced by 10%;
• DTI requirements become stricter, reducing your borrowing capacity by approximately 30%.

Q7: How do I remove myself as a guarantor? Does the borrower need to sign?

When the primary borrower's income is sufficient to pass the stress test independently, you can apply to the bank to be removed as guarantor:

• Generally no penalty interest, and the guarantor doesn't need to sign additional documents;
• After successful removal, confirm that credit bureau records (e.g., TU) have been updated;
• If needed, request an updated Facility Letter from the bank as future proof.

5. Mortgage Insurance & Refinancing How to Exit Mortgage Insurance

Q8: What is "exiting mortgage insurance"? What are the benefits?

When property value increases or you've paid down enough principal to bring the LTV to around 70% or below, you can consider applying to the original bank to cancel mortgage insurance:

• Generally, canceling within 2 years of drawdown can recover approximately 25% of the original premium;
• Canceling within 3 years can recover approximately 15%;
• Property usage restrictions change from "must be self-occupied" to legally rentable, greatly increasing flexibility.

6. Special Cases: Haunted Properties, Staff Plans, etc. Valuation & Employment Risks

Q9: Can haunted properties get mortgages?

Banks primarily focus on whether valuers are willing to provide a valuation for the unit:

• If valuers can still provide a valuation, banks may approve a mortgage, but with lower LTV and higher interest rates;
• If the valuation report shows "unable to value," banks generally won't approve any mortgage.

Q10: What are the potential risks of bank staff mortgages (Staff Plans)?

While Staff Plans often offer very attractive rates and LTV ratios, be aware:

• Upon resignation or redundancy, the bank may require loan repayment within a short period or refinancing to a "street plan";
• If property values have dropped by then, new banks may only approve 80-90% LTV, requiring staff to provide additional cash to cover the gap;
• Otherwise, there's risk of loan recall, forcing property sale or using other assets to repay.