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In the Hong Kong real estate market,Old Building(generally refers to properties over 30 years old) andtenement building(Low-rise pre-war or post-war buildings without elevators) attract many buyers or investors with limited budgets because of their relatively low prices. However, mortgage applications for this type of property are often more complicated than for new buildings, and bank approval is also stricter.
Common issues include valuation difficulties, structural safety and legal issues, while rejections are often related to insufficient income or property risks. This article will analyze in depth the key points of mortgages for old buildings and tenement buildings, including the mortgage ratio, maximum repayment period, common problems and reasons for rejection, to help you avoid traps and get on the loan smoothly.
1. Definition and mortgage challenges of old buildings and tenement buildings
The mortgage ratio for old buildings and tenement buildings in Hong Kong is similar to that for private buildings. Theoretically, the maximum mortgage ratio can reach 90% through mortgage insurance. It is applicable to properties worth 4 million to 10 million yuan and must be for self-occupation. The maximum mortgage ratio for properties worth 10 million to 15 million yuan is 80%, and the maximum loan amount is HK$9 million. However, due to the age of old buildings and tenement buildings, banks are more conservative in their valuations, especially if the property has structural problems or illegal construction, the actual mortgage ratio may be as low as 60-70%. First-time homebuyers can enjoy a higher percentage, but they should be aware that the transaction volume of tenement buildings is low, and there may be a gap between the valuation and the listing price. It is recommended to reserve more for the down payment.
1. What are “old buildings” and “tenement buildings”?
- Old Building: Generally refers to residential or mixed commercial and residential buildings that are more than 30 years old, some of which may lack modern management or facilities.
- tenement building: Mostly refers to 4 to 8-storey buildings built between the 1950s and 1970s, which have no elevators and narrow staircases. They are commonly found in old districts such as Sham Shui Po and Mong Kok. Some of the tenement buildings are pre-war buildings with historical value but are relatively old in structure.
2. Peculiarities of mortgage applications
- Old building: Affects the mortgage amount and repayment period.
- Structural risks: Some old buildings are not well maintained and banks may require a building inspection.
- Complex uses: Mixed commercial and residential buildings may involve land deed issues.
- Valuation Difficulty: There are few transactions in the same area and bank valuations are conservative.
2. Mortgage ratio: What is the maximum amount you can borrow?
1. Basic restrictions under the HKMA’s guidelines
According to the Hong Kong Monetary Authority,Property price below HK$10 millionThe upper limit of mortgage loan amount is60%(First-time homebuyers can borrow up to 90% through the mortgage insurance program). However, old buildings and tenement buildings are usually subject to the following restrictions:
| Building Age | Maximum loan-to-value ratio(Not the first time) | Remark |
|---|---|---|
| Under 30 years | 60% | Same as ordinary residence |
| 30-40 years | 50%-60% | Some banks may reduce the rate to 50% |
| 40-50 years | 40%-50% | Building inspection required |
| More than 50 years | Difficult to obtain approval or very low approval rate | Most banks refuse to approve, need to seek financial company |
2. Is the Mortgage Insurance Programme (HKMC) applicable?
- Old Building: If the building is ≤50 years old, you can apply for a mortgage insurance plan (such as the "New Mortgage Insurance"), with a maximum loan of 90% (the maximum house price is HK$4 million).
- tenement building: Even if the building is ≤50 years old, some mortgage insurance companies may refuse to insure and need to approve each case.
3. Key factors affecting the percentage
- Property Condition: If structural problems are found during the building inspection, the percentage may be reduced further.
- Title deed terms：If the land lease restricts reconstruction or use, banks may tighten lending.
- Borrower conditions: Those with stable income and good credit rating are more likely to be approved for a higher loan amount.
3. Longest repayment period: 30 years minus the age of the building?
The maximum repayment period for a mortgage in Hong Kong is usually 30 years, but must not exceed the buyer's 70 years old. For old buildings and tenement buildings, due to their age, banks may consider the remaining life of the property and the actual repayment period may be shortened to 20-25 years, especially if the property has not been regularly maintained or has structural problems. As tenement buildings do not have elevators, banks may be more cautious about long repayment periods. Buyers are advised to check the bank’s policies before applying.
1. Bank calculation formula
The longest repayment period for general residential buildings is 30 years, but old buildings and tenement buildings are subject to the "75 years of building age reduction"or"70 years of building age reduction" (whichever is lower). For example:
- Building age 40 years: 75 – 40 = 35 years → However, the maximum repayment period is 30 years.25 years(Some banks have additional restrictions).
- Building age 50 years: 75 – 50 = 25 years → The repayment period may be shortened to15-20 years.
2. Comparison of actual cases
| bank | 40-year-old building | 50-year-old tenement building |
|---|---|---|
| Bank A | 25 years | 15 years |
| Bank B | 20 years | Rejection of application |
| Finance Company | 30 years | 20 years |
3. Borrower age limit
- Most banks requireRepayment period + Borrower age ≤ 70-75 years". If the borrower is 60 years old, the longest repayment period is only 10-15 years, and the monthly payment pressure will increase significantly.
Four,Reasons for rejection and solutions
1. Why are old building mortgages undervalued?
There have been few transactions in the same area recently, so banks rely on conservative estimates.
Solution: Prepare an additional down payment, or provide proof of renovation contract to increase the valuation.
2. What exactly does the building inspection requirements include?
The bank may commission an approved engineer to inspect the structure, plumbing and electrical systems.
If problems such as asbestos and rusted steel bars are found, they must be repaired before the mortgage can be approved.
3. Are tenement buildings mortgage rates higher?
Some banks have increased interest rates on old building mortgages by 0.1%-0.3%, or charged a high-risk surcharge.
The interest rates of finance companies are higher (annual interest rates are approximately 4%-8%).
4. How to prove the property use?
solve：Provide an Occupancy Permit to confirm that residential use is permitted.
For mixed commercial and residential tenement buildings, business registration and lease (if applicable) must be submitted.
5. Are fire insurance costs more expensive for old buildings?
Due to the high cost of reconstruction, insurance companies may increase premiums, with an average annual increase of about 0.1%-0.15% in house prices.
6. Building age (over 50 years old), resulting in insufficient mortgage loan amount
solve: Turn to a finance company or small bank, or consider co-borrowers to share the risk.
7. Property structure issues, tenement buildings without elevators or with maintenance orders are considered high risk by banks
solve: Carry out repairs first and obtain a satisfactory report, or negotiate with the owner to reduce the selling price.
8. Unclear terms of the title deed
solve: Entrust a lawyer to check the title deed to confirm that there are no illegal alterations or restrictions on use.
9. Self-employed persons orBorrower’s financial situation is not good, failed to pass the stress test, especially high-ratio mortgage applications.
solve: Add a guarantor, provide more proof of assets, or choose a mortgage with a lower loan amount.
10. The property involves illegal construction or legal disputes
solve: Clarify legal responsibilities and restore the unit to its original state, and terminate the transaction if necessary.
5. Application Tips: Increase Your Mortgage Success Rate
- Pre-building inspection: Hire an approved engineer to inspect and fix the problem at your own expense.
- Compare multiple banks：Small banks may be more relaxed in approving old buildings.
- Prepare sufficient documents: Including maintenance records, copy of title deed, rental income certificate, etc.
- Consider first home buyer qualifications: Increase the ratio to 90% through the "New Mortgage Insurance" (property price ≤ HK$4 million).
- Consult professionals: A mortgage broker or lawyer can help with complex cases.
Conclusion
Although old buildings and tenement buildings are attractively priced, mortgage applications involve hidden risks. Buyers must carefully evaluate the property's condition, their own repayment ability, and reserve sufficient funds to cover the cost of undervaluation or repairs. It is recommended to obtain "pre-approval" from the bank before signing a provisional sales agreement to ensure a smooth mortgage and avoid losses due to cancellation of the order.
