The Mortgage Process: A Step-by-Step Guide

In Hong Kong, buying a home requires substantial financial flexibility, prompting many young people to consider taking out mortgages to secure their dream house. For first-time property buyers, however, the mortgage application process can be particularly daunting. This is why it is important to understand all the key steps for a mortgage application to ensure a smooth approval process. From purchasing the property to learning how to get approved for a mortgage, the article below serves as an easy step-by-step guide to help you prepare thoroughly for homeownership and navigate the process of settling down.

Purchasing a Property

After deciding to purchase a property, you must sign a Provisional Sale and Purchase Agreement and pay the initial deposit, which typically amounts to 3%-5% of the property price. The buyer and seller can also agree on a date to sign the Formal Agreement for Sale and Purchase, usually set 14 days after signing the provisional agreement. The buyer may appoint a lawyer approved by the bank to conduct a land search, verify the house deed, and draft the formal contract. When signing the Formal Agreement for Sale and Purchase, the buyer must pay the further deposit and the stamp duty through the lawyer.

Understanding Mortgages

Before beginning the mortgage application process for approval, it’s essential to understand what mortgages are and what institutions provide them, especially for house buyers who are looking to apply for a mortgage for the first time. A mortgage is essentially a loan secured by a property, allowing borrowers to pay for a property with minimal upfront cash. Most mortgage loans are for private residential properties, and borrowers must repay the loan in installments, including both initial amount and interest. If the borrower fails to repay, the lender has the right to reclaim the property.

In Hong Kong, mortgages are available from banks, developers, financial institutions, or mortgage service providers. Bank mortgages adhere to government regulations and HKMA guidelines, with a stricter approval process but lower interest rates. On the other hand, mortgages offered by developers, financial institutions, or mortgage service providers, while less regulated and easier to secure, may lead to increased interest rates after an initial low-rate period.

Preparing for a Mortgage Application

After signing the Provisional Sale and Purchase Agreement, you can apply for a mortgage with a bank or a mortgage service provider. Before applying, the applicant should prepare the following documents in advance:

• Identity card
• Proof of address within the last three months
• Employment proof or recent three months’ payslips
• Bank account details with recent three months’ statements
• Recent one-year’s tax return
• Preliminary sales and purchase agreement
• Lawyer’s office information or business card

The documents required for mortgage approval may vary between financial institutions. To ensure a smooth application process, you should check the specific requirements with each lender.

Choosing the Right Mortgage Plan and Submitting the Application

Compare mortgage plans from different banks and mortgage service providers, considering interest rates, cashback offers, early repayment penalties, high-interest savings accounts, and the bank’s approval term based on the property’s age. Choose the plan that best suits your financial situation and submit your mortgage application to the bank.

It’s advisable to check your credit report to assess your repayment ability before deciding on a mortgage plan. You should also familiarize yourself with their unique conditions for the mortgage approval process and consider factors like the loan-to-value ratio, repayment period, and interest rate to ensure a smooth approval process.

Mortgage Approval Process

Each bank or mortgage service provider may have different requirements for income documents, so pay attention to their demands to avoid delays in the approval process. Once the bank or financial institution receives the application, they will appraise the property and may review the applicant’s credit report. They will assess factors such as the property type, valuation, and age, as well as the borrower’s income and repayment ability, to determine the interest rate, loan amount, and loan term. The approval process typically takes 2-3 weeks.

Once the bank or the financial institution approves the loan, the applicant will receive a confirmation letter, email, or message.

Signing Mortgage Documents

After signing the confirmation letter or message, the bank will notify the lawyer’s office to prepare the mortgage deed. Before the transaction date, the applicant needs to sign the mortgage deed, the house deed, and other necessary documents at the lawyer’s office. The lawyer will then notify the bank, which will transfer the approved mortgage funds to the lawyer’s office, who will then pass it on to the seller, completing the property transaction. For some mortgage service providers, such as Credit Ko, there’s no extra procedure; the applicant can receive the mortgage funds via FPS or other online payment transfer methods.

Starting Repayments

After the property transaction is complete, the applicant will receive a repayment schedule or notification from the bank or the respective financial institution detailing the initial fee, interest, and loan balance. The applicant must start making payments on the date specified in the mortgage contract.

Contact Credit KO to Find an Easily Approved Mortgage

Credit KO is dedicated to providing quality loan services for Hong Kong residents, helping them manage financial difficulties and meet various needs. We offer tailored mortgage loan services for every homeowner. Whether you are a first-time house buyer or looking to secure a second mortgage loan, we offer no restrictions on property age, no credit score checks, and a fast approval process. Get in touch with us to learn more today.