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Kenneth Ko

INTENSE competition has pressed Wheelock Properties to follow other developers in providing top-up mortgage loans for buyers of its Parc Regal project in Ho Man Tin Hill.

  This is the first time Wheelock has offered second mortgages to buyers of its residential projects.

  To stand out from the increasingly popular second mortgage loans, Wheelock has come up with an innovative scheme to ease the financial burden on home buyers for the initial years of borrowing.

  Under the new scheme, Hongkong Bank, Hang Seng Bank, Standard Chartered Bank, Bank of East Asia and First Pacific Bank have agreed to provide 70 per cent mortgages.

  Wheelock will offer an extra 20 per cent loan for which repayments are not required during the first three years.

  Buyers of Parc Regal will have to pay loan interest from the fourth year while final settlement of the loan and interest will be called at the end of the fifth year.

  The extra 20 per cent loan will carry a fixed interest rate of 10.75 per cent for the first three years.

  The accrued three-year interest will be added to the principal loan as a lump sum with an interest rate of 10.75 per cent or 175 basis points above the prime rate, whichever is higher, for the fourth and fifth years.

  The new scheme has its pros and cons. There is no doubt that it could reduce the initial down payment and monthly capital outlay of buyers.

  But mortgage borrowers will have to face heavy accumulated interest expenses in the end.

  Estimates are that the accumulated interest for five years could be more than 60 per cent of the 20 per cent top-up mortgages for the Parc Regal units, which sell for between $5.6 million and $7 million each.

  Wheelock said its second mortgage scheme was primarily designed to help home buyers who might find it easier to repay the loan after five years as their salaries rose and property prices appreciated.

  Developers' second mortgage offers are intended to speed up their property sales but the finance schemes will tie up part of their capital, which is unfavourable to long-term cash flows.

  Many developers hope that the second mortgage concept will be a temporary measure until banks relax their lending policies.

  The Government's insistence on the 70 per cent mortgage limits have pushed banks and developers to resort to various strategies and devices to drum up lending business and property sales.

  Banks have been forced to cut mortgage rates to attract home buyers while developers race to trim prices.

  This is a strange development. On the one hand, the Government dismisses any possibility of relaxing the 70 per cent mortgage ceiling.

  On the other, it has given tacit approval to the co-finance scheme between banks and developers, which effectively breaches the 70 per cent ceiling.

  Home buyers who cannot secure higher than 70 per cent mortgages from banks are forced to get second mortgages from developers.

  In most cases, however, they are required to pay a premium in property prices in order to secure the second mortgage facilities from developers.

  Those buyers who are not as cash-rich or have difficulties in presenting 30 per cent down payments turn out to be the ones suffering the most in the current market.



Wheelock joins second mortgage bandwagon