Banks focus on service and variety

PUBLISHED : Friday, 19 May, 2006, 12:00am
UPDATED : Friday, 19 May, 2006, 12:00am

AS THE MAINLAND'S home mortgage market is not as competitive as Hong Kong's, most banks tend to attract customers with better service and greater product variety rather than price cutting.

Buyers can secure mortgage loans in yuan, Hong Kong or US dollars from mainland and foreign banks for luxury properties.

The loan-to-value ratio varies from bank to bank, but most players secure mortgages equivalent to 60 per cent to 70 per cent of the purchase price or the market value, whichever is lower, according to Florence Pau, senior vice-president with Citic Ka Wah Bank.

Ms Pau said the traditional mortgage instalment scheme remained the most popular and the normal loan tenor was between 15 and 20 years.

The official lending rate for a yuan-denominated mortgage is 6.39 per cent, but some banks may offer a rate as low as 5.75 per cent. The lending rate for Hong Kong and US dollar-denominated mortgages is about 6.5 per cent.

For a $1 million loan with a tenor of 15 years, for example, the borrower must make a monthly repayment of about $8,712 based on the prevailing mortgage rate.

People buying in the primary market, involving mainly unfinished flats, should take into account the goodwill of the developer, the property's development schedule and its quality on completion, which will affect a bank's decision in extending mortgages.

For buyers of second-hand property, it is important to ensure that the property's ownership certificate is properly in place. Borrowers are advised to obtain a property valuation report and provisional approval from a bank for the required loan amount before buying.

Ms Pau said borrowers needed to submit income proof, copy of purchase agreement and the property ownership certificate when making a mortgage application. They must pay a range of fees and charges associated with mortgage approval, but these costs may vary from city to city.

Based on Citic Ka Wah Bank's experience in Shanghai, the costs include bank handling fee (about 0.5 per cent of loan amount), document notarisation fee (0.15 per cent of loan amount), legal fees (about $3,000), property mortgage insurance premium (0.1 per cent to 0.15 per cent of loan size), stamp duty (0.01 per cent of loan amount) and valuation fee (about $1,000 to $4,800 based on the purchase price).