Hong Kong Mortgage Corporation Announced Increased of Mortgage Insurance for Eligible Properties under Construction for Property Value Limit from HKD 6 Million to HKD 30 Million, USD Equivalent of $767,000 to $3.8 Million
23rd September 2023 | Hong Kong
The Hong Kong Mortgage Corporation (HKMC) has announced the increased of mortgage insurance for eligible properties under construction for property value limit from HKD 6 million to HKD 30 million ($767,000 to $3.8 million), effective on 22nd September 2023. HKMC: Amendments are made to the Mortgage Insurance Programme (MIP) for residential properties under construction so that the applicable eligibility criteria align with those for completed residential properties.The amended eligibility criteria will apply to mortgage loans for properties under construction for self-occupation with provisional agreements for sale and purchase executed on or after 22 September. 2023. Before that, the MIP could only provide mortgage insurance for properties under construction with property value up to HK$6 million. In making the amendments this time, the HKMCI has considered the property market conditions and its own business and risk factors, and is seeking to enable the MIP to further promote home ownership. 1) for eligible properties under construction with property value up to HK$10 million, the maximum loan-to-value (LTV) ratio is 90%; 2) for eligible properties under construction with property value above HK$10 million and up to HK$15 million, the maximum LTV ratio is 80% or an LTV ratio derived from a mortgage loan cap of HK$9 million, whichever the higher; and 3) for eligible properties under construction with property value above HK$15 million and up to HK$30 million, the maximum LTV ratio is 70% or an LTV ratio derived from a mortgage loan cap of HK$12 million, whichever the higher.” See below for more info:
“ Hong Kong Mortgage Corporation Announced Increased of Mortgage Insurance for Eligible Properties under Construction for Property Value Limit from HKD 6 Million to HKD 30 Million, USD Equivalent of $767,000 to $3.8 Million “
Hong Kong Mortgage Corporation Announced Increased of Mortgage Insurance for Eligible Properties under Construction for Property Value Limit from HKD 6 Million to HKD 30 Million
22nd September 2023 – HKMC Insurance Limited (HKMCI), a wholly-owned subsidiary of The Hong Kong Mortgage Corporation Limited, announced today (22 September) that amendments are made to the Mortgage Insurance Programme (MIP) for residential properties under construction(Note) so that the applicable eligibility criteria align with those for completed residential properties. Upon the amendments:
- for eligible properties under construction with property value up to HK$10 million, the maximum loan-to-value (LTV) ratio is 90%;
- for eligible properties under construction with property value above HK$10 million and up to HK$15 million, the maximum LTV ratio is 80% or an LTV ratio derived from a mortgage loan cap of HK$9 million, whichever the higher; and
- for eligible properties under construction with property value above HK$15 million and up to HK$30 million, the maximum LTV ratio is 70% or an LTV ratio derived from a mortgage loan cap of HK$12 million, whichever the higher.
The amended eligibility criteria will apply to mortgage loans for properties under construction for self-occupation with provisional agreements for sale and purchase executed on or after 22 September 2023.
Before that, the MIP could only provide mortgage insurance for properties under construction with property value up to HK$6 million. In making the amendments this time, the HKMCI has considered the property market conditions and its own business and risk factors, and is seeking to enable the MIP to further promote home ownership. Details of the MIP are available at the programme’s web page: https://www.hkmc.com.hk/eng/our_business/mortgage_insurance_programme.html
Notes: Pursuant to the eligibility criteria of the MIP, properties under construction must be covered by the Lands Department Consent Scheme and scheduled for completion within 12 months from the drawdown dates of the mortgage loans. For those properties not meeting these criteria, the HKMCI will consider on a case-by-case basis having regard to risk factors. Homebuyers can consult banks to ascertain whether a property development project under construction is covered by the MIP.
The Mortgage Insurance Programme
The Mortgage Insurance Programme (“MIP”) was launched by The Hong Kong Mortgage Corporation Limited (“HKMC”) in March 1999 for promoting home ownership in Hong Kong. The MIP business has been transferred to and carried out by HKMC Insurance Limited (“HKMCI”), a wholly-owned subsidiary of the HKMC, with effect from 1 May 2018.
According to the guideline issued by the Hong Kong Monetary Authority, banks have to comply with loan-to-value (“LTV”) requirement on owner-occupied residential mortgage lending. Yet, with the MIP providing mortgage insurance to banks, banks can provide mortgage loans with higher LTV ratio without incurring additional credit risk. As long as an application meets the relevant eligibility criteria (e.g. the maximum property value and the maximum loan amount, etc.), the bank can provide a mortgage loan of up to 80% LTV ratio under the MIP. In other words, homebuyers may only need to pay 20% of the property price for the down payment, which greatly reduces their down payment burden. Under the MIP, banks are the mortgage loan providers. The mortgage insurance aims to protect the participating banks from losses, in general, on the portion of the loan over the 70% LTV threshold due to mortgage default by the borrowers. Therefore, in addition to helping the promotion of home ownership, the MIP also contributes to the maintenance of the banking stability.
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