2025-07-04 28Hse Editor
Applying for a mortgage is one of the most crucial steps in purchasing a property. It involves evaluating the borrower's financial capacity, the property's valuation, and the bank's stance. Recently, banks have tightened their mortgage application processes, making them more cautious. Therefore, it's essential to prepare documents in advance to expedite the approval process.
Required documents for a mortgage application include a Hong Kong identity card, proof of address, a Provisional Sale and Purchase Agreement, the most recent three months of payslips (six months for non-fixed income earners), and in some cases, up to two years of income proof, the latest three months of bank statements (six months for non-fixed income earners), the latest year's tax return, and credit card statements.
Incomplete documentation can delay the approval process. Proactively submitting the aforementioned documents to the bank can save time for both parties and avoid multiple follow-ups, thus speeding up the approval process.
Once notified by the bank that the mortgage application has been approved, the applicant needs to sign the mortgage offer letter within a specified time frame. This letter outlines important details such as the names of the borrower and guarantor (if any), loan term and amount, interest rate, penalty period, and any cash rebates.
It's crucial to carefully review the contents of the mortgage offer letter to ensure it matches what was discussed with the bank representative and meets your expectations. After thorough consideration, you can sign the offer letter. Note that if you change your mind after signing, the bank will charge a handling fee—for example, Bank of China charges 0.15% of the loan amount, with a minimum fee of HK$5,000.
Does signing the mortgage offer letter mean the loan is guaranteed? Not necessarily. Until the bank disburses the funds, there can still be variables. Common reasons for loan rejection include structural changes discovered during the property inspection, significant valuation changes, or the property receiving repair orders or court orders before the transaction.
Regarding valuations, during the initial approval stage, the bank obtains an oral property valuation from a valuation firm to calculate the loan amount. Only after the applicant signs the offer letter does the bank request a formal property valuation report from the surveyor, who may update the valuation.
The property market is unpredictable. If the new valuation significantly differs from the initial one, the bank may reject the mortgage or adjust the final loan amount. In such cases, the applicant can consider appealing to the bank or checking if a backup bank can proceed with the application.
When appealing, the applicant needs to provide reasonable grounds, such as demonstrating that the initial low valuation was due to a below-market transaction. Evidence such as property records can prove that the low-priced units were close-relative transfers, unregistered properties, or distressed sales, prompting the valuation firm to reassess the value.
Regarding repair orders, it's best to obtain details from the Buildings Department or the owners' corporation and proactively discuss them with the bank. If the bank deems the repair order low-risk and the owner is willing to sign an undertaking to cover the related costs, the bank may approve the mortgage. If the bank learns about the repair order too late, this resolution might not be possible.
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