Choice is the byword when it comes to mortgages these days, with a multitude of products that cater to most needs. But consumers need to choose carefully or risk being saddled with unsuitable terms and charges. Lawrence Law Hong-ping, head of mortgages and deposits at HSBC, advises people about to make those choices to plan ahead. 'We suggest people visit a financial institution as early as possible, as soon as they have the intention to purchase,' he said. 'The institution can help them check their financial strength and spending patterns. With this information, the bank can determine their borrowing and repay ment ability.' With all the steps potential home buyers had to go through, Mr Law said, the process of securing a loan could cause serious levels of anxiety, especially for first-time buyers. 'Without proper planning, the agents may pressure the customer for a down payment,' he said. HSBC's Web site is useful for potential buyers and gives background information about mortgage products. Advisers provide an informed view on processes and legal and stamp-duty fees, and can suggest law firms if a buyer has no lawyer, and even a list of property agents. 'We offer a whole range of repayment methods. We do not just push a repayment plan on customers,' said Mr Law, explaining that different requirements necessitated different options. Individuals with steady employment and stable income often opt for standard monthly or fortnightly repayments, or straight-line repayment. HSBC recently launched its FreeChoice Mortgage, aimed at customers who do not want to repay much within the first three years. Possibly, they have other expenses, and although they can service the debt, they want a more comfortable cash flow. There is also the bank's 'house start programme', which includes goodies such as giving potential buyers the right to view flats before making a decision, making available the best units of a development and, at least for the last programme, a HK$2,000 cash rebate on signing a mortgage agreement. HSBC is likely to start another such programme in the near future. HSBC has also launched an Investor Mortgage targeted at investment properties. All terms and conditions are nearly identical to usual home loans except the rate is 50 basis points higher. A common rate is prime minus 2.5 per cent. The process has been simplified and there is no need for annual reviews. Terms are similar to regular home loans and income assessment takes into consideration net liquid assets to calculate an assumed return. Mr Law said that, given the climate of low interest rates for savings deposits and the fact that mortgage interest rates were low, people should consider investment property. Frida Li, senior vice-president and head of retail banking at Citic Ka Wah Bank, said at present the market gave buyers the advantage. She said agents' commissions could now be negotiated so the buyer paid less. 'If the property is a new development, there are lots of options and products available. Developers often throw in things like free parking and cash rebates,' Ms Li said. But she warned there were 'no free lunches'. If, for example, buyers were not required to make payments for the first two years, they needed to look carefully at the interest rate charged or the sales price, which might be higher. 'One does not get something for nothing,' she said. 'Make your calculations before you look. Identify districts, how much you can afford and the size of the flat. Then go to a bank and get advice about your own financial capability.' There are no incentives in the second-hand market and the decision on whether to buy comes down to the suitability of a property. Banks also keep lists of approved solicitors, and legal fees are inexpensive compared with a few years ago. 'Don't just look at the cheap price [of solicitors],' Ms Li said. 'Sometimes, it is so cheap that you know it's not possible to provide the service unless they cut a lot of processes and do not offer comprehensive services such as searching for overdue management fees or any other liens which could be a big surprise to an unsuspecting new owner.' The buyer's goal should be to find the best but cheapest deal, said Albert Wong, chief executive of mReferral. 'This was easier in the past but now, with so much product differentiation, it could take weeks just trying to sift through the materials,' he said. 'Lots of people, after they look at a property, ask the agents where they could get a good mortgage. 'The agent is not a specialist, but to appease the customer he might just recommend anything and this may not be in the buyer's best interests.' Mr Wong said mReferral was one of the first mortgage referral services to be established in Hong Kong. The company is backed by American Express, Cheung Kong (Holdings) and Midland CyberNet and works with about 200 smaller property agencies. It has plans to sign another 100 by the end of the year. There is no fee for this service as the banks pay a commission to mReferral. Mr Wong said customers often went to their regular bank - where they were known - to secure a mortgage but that bank may not have the most suitable product for the customer's needs. This could result in the customer being sold an unsuitable product. 'It is important for buyers to assess their financial position before buying,' Mr Wong said. 'For example, a 70 per cent or 90 per cent mortgage - the initial capital outlay often makes a difference in the interest rate charged.' Straight-line mortgages offer the most straightforward method of repayment but deferred payments, where payments do not begin until some time after purchase, can be chosen in anticipation of future earnings. This type of plan is often chosen by professionals who expect a higher income after getting a qualification or licence. Mr Wong said another issue was the size of the down payment, adding that the greater the amount, the better. 'Look at your repayment capability and the repayment period. If you have a good salary and stable position then pay back more and sooner,' he said. Mr Wong, like Citic Ka Wah's Ms Li, stressed that marketing costs and perks offered were usually reflected in the interest rates.