IF you have been listening to all the hype recently about 'mortgage wars', you probably think local banks are holding a fire sale, so eager are they to part with their money. Branches are almost falling over themselves with incentives to get first-time buyers to sign on the dotted line. It must be a pleasant surprise for buyers. Just over a year ago, getting a first mortgage was almost impossible. Then, with the property boom at its height, banks were worried about their loan portfolios becoming over-exposed. Now that the property market is in the doldrums, banks have changed their tune and have mounted large, expensive promotions to persuade people to borrow again. These days, first-time buyers who wander into their local branch to check out mortgage financing packages are likely to be welcomed with open arms. 'Banks are more willing to lend money on the residential side because of the low risk,' said analyst Eric Yuen of Asia Equity. Analysts said that banks were eager to find sources to drive their profit growth. Lending to first-time home buyers constituted a relatively safe risk. Family Money contacted a number of banks to get an idea of what was on offer. While banks are eager for new business, by no stretch of the imagination are they deeply discounting mortgage rates or doing anything about the Hong Kong Monetary Authority's 70 per cent ceiling on residential mortgage lending. And if for some reason you are able to pay off your mortgage in 12 months or less, forget about the standard $10,000 penalty fee they talk about. In reality, it is at least triple the minimum stipulated. And you can virtually forget about buying an older property. If you thought turning 30 years of age was traumatic, wait until you try buying a residential property that is more than 20 years old in this town. Most banks take the age of the property and add that to the life of the mortgage. If that sum comes out to more than 35, you can pretty much say goodbye to your dream home, because you will not get a mortgage for love nor money. Then, there is your age. Here, banks are a bit more lenient. The magic number is 60: your age plus the term of the mortgage. All in all, while banks are happy to lend you money, in the main it is only for the types of properties they think you should buy: specifically, new ones. All the banks contacted offer a standard 10.75 per cent mortgage, but they are more than willing to bend and lower their rate by 0.25 per cent and, in one case, by as much as half a percentage point. Not a lot, but then if you are borrowing in excess of $2 million for your dream home, it could prove to be a substantial sum over the life of the mortgage, which can be as long as 25 years. If you are buying a brand new property, the chances are the purchase price will be the same as the bank's valuation of the property. But, if you are looking at a second-hand property, be careful. Banks will only give you a 70 per cent mortgage on the valuation of the property and not what you paid for it. In some cases, particularly in a bullish market, there could be a large discrepancy between the two figures. Be prepared to pay a valuation fee which, depending upon the bank, can range from $1,000 to $2,500. Banks by their nature are cautious and they will want to know how much you make before they give you a loan. Most banks require a plethora of documentation to prove that you are honest and that you earn what you say you do. So be prepared to come up with a sheaf of back income tax statements, payroll statements supplied by your company and the like. Banks usually will only lend you a maximum of 50 per cent of your monthly salary. In some cases, the maximum is only 40 per cent. In most cases, the smaller your take-home pay, the lower the percentage they are willing to lend. If you earn, say, $28,000 per month or less, they will usually only lend you 40 per cent. But they will happily give you 50 per cent if you make more than $40,000 per month. This means, if you have a 15-year mortgage at 10.75 per cent on a $3 million home you would have to come up with just over $23,000 per month. With competition among banks being so stiff, it is always worthwhile to ask what other 'goodies' your favourite lending institution is offering. Many banks contacted said they would provide one year's fire insurance free. Some said they would waive credit card fees for a year for people who take out a mortgage. One bank even gives preferential treatment to accounts with more than $500,000. Mortgages are long-term commitments and just as there are incentives there are penalties. If you decide to pay off your mortgage in one year you will be penalised, in some cases quite severely. For instance, Hang Seng Bank and Standard Chartered Bank both charge $50,000 or three per cent of the total mortgage (whichever is higher) for early repayment. Considering the depressed state of the property market, many banks have entered into agreements with different developers around town. A couple of banks said they provided slight discounts if people bought units in recently launched developments. It is best to ask individual banks about their relationships with various developers and their developments. Developers also offer incentives to home buyers, through their own top-up loans. According to one bank customer service representative, the best method is to pick the development of your choice and call the developer's sales office.