Tuesday, 3 March 2015

Mortgage Insurance Program Amended by The Hong Kong Monetary Authority

The Government has announces changes to the Mortgage Insurance Program (MIP) on Friday to coincide with changes in the current mortgage loan to value ratios. Refer to our blog
Under the current system The Hong Kong Mortgage Corporation Limited (HKMC) provides MIP coverage for mortgage loans starting at 60% loan-to-value (“LTV”) on owner-occupied residential mortgage lending for properties valued below HK$7 million (up to 90% for properties valued at HK 4 million and under),  The remaining 20% is covered by the insurance program thus reducing the credit risks to the banks resulting in the homebuyer only having to pay a 20% deposit.  Therefore, in addition to helping the promotion of home ownership, the MIP also contributes to the maintenance of the banking stability.
Under the new revisions MIP coverage for eligible properties will be as follows
Property ValueMaximum LTV Ratio
Up to HK$4 million80% or 90%*
Above HK$4 million and below HK$4.5 million80% – 90%*, subject to a cap of HK$3.6 million
(whichever is lower)
At or above HK$4.5 million and up to HK$6 million80% or capped at HK$4.8 million
(whichever is lower)
* only applicable to regular salaried first time homebuyers (not holding any residential properties at the time of application) with maximum debt-to-income ratio of 45%

The above revisions take effect immediately.  However, for homebuyers who have executed the provisional sale and purchase agreement on or before 27 February 2015, their mortgage loan applications may be submitted by the MIP for processing.