Podcast
Questions and Answers
What is a consequence of having negative equity in a home?
What is a consequence of having negative equity in a home?
- The outstanding mortgage is greater than the home's current value. (correct)
- Homeowners have more equity in their property.
- Homeowners cannot refinance their mortgage.
- The mortgage value is less than the home's current value.
What year did the property price levels hit their lowest point before starting to rise?
What year did the property price levels hit their lowest point before starting to rise?
- 2003 (correct)
- 1997
- 2001
- 2000
What event demonstrates the lender's attempts to recover loan balances from borrowers?
What event demonstrates the lender's attempts to recover loan balances from borrowers?
- Refinance
- Default deferment
- Home appreciation
- Foreclosure (correct)
What has primarily fueled the property market rise since 2009?
What has primarily fueled the property market rise since 2009?
In what year did many Hong Kong homeowners experience negative equity?
In what year did many Hong Kong homeowners experience negative equity?
What is the maximum loan amount a bank can provide under the MIP based on an 80% LTV ratio?
What is the maximum loan amount a bank can provide under the MIP based on an 80% LTV ratio?
Which of the following is not a factor that influenced home prices in the HK property market post-2003?
Which of the following is not a factor that influenced home prices in the HK property market post-2003?
Which of the following is a disadvantage of renting?
Which of the following is a disadvantage of renting?
What happens during the mortgage foreclosure process?
What happens during the mortgage foreclosure process?
Which market condition preceded the rebounding of home prices in 2003?
Which market condition preceded the rebounding of home prices in 2003?
What is not usually specified in a rental contract?
What is not usually specified in a rental contract?
Which of the following reflects a psychological benefit of home ownership?
Which of the following reflects a psychological benefit of home ownership?
What can result from a prolonged period of low interest rates in the housing market?
What can result from a prolonged period of low interest rates in the housing market?
What is one potential financial benefit of home ownership?
What is one potential financial benefit of home ownership?
What is the likely effect of homeowners quitting payments on their mortgage?
What is the likely effect of homeowners quitting payments on their mortgage?
Which area is not mentioned in relation to property prices in graph analysis?
Which area is not mentioned in relation to property prices in graph analysis?
What type of costs should be considered when comparing renting and buying?
What type of costs should be considered when comparing renting and buying?
What is a common challenge associated with renting?
What is a common challenge associated with renting?
What is typically considered a sign of a recovering property market?
What is typically considered a sign of a recovering property market?
What is the primary reason for the quick rebound of the property market after 2003?
What is the primary reason for the quick rebound of the property market after 2003?
What should one evaluate when determining how large a monthly mortgage payment they can afford?
What should one evaluate when determining how large a monthly mortgage payment they can afford?
What can negative equity lead homeowners to consider as a potential solution?
What can negative equity lead homeowners to consider as a potential solution?
What does amortization refer to in the context of mortgage payments?
What does amortization refer to in the context of mortgage payments?
How is the monthly payment (P) calculated for the mortgage?
How is the monthly payment (P) calculated for the mortgage?
If the property value is $3 million and the mortgage loan is 70%, what is the loan amount (L)?
If the property value is $3 million and the mortgage loan is 70%, what is the loan amount (L)?
What is the interest part of the first month's mortgage payment if the loan amount is $2.1 million and the monthly interest rate is 0.25%?
What is the interest part of the first month's mortgage payment if the loan amount is $2.1 million and the monthly interest rate is 0.25%?
What is the outstanding balance after the first month's payment if the initial balance was $2.1 million?
What is the outstanding balance after the first month's payment if the initial balance was $2.1 million?
Which of the following best describes the Mortgage Insurance Programme (MIP)?
Which of the following best describes the Mortgage Insurance Programme (MIP)?
What happens to the outstanding balance after each monthly payment?
What happens to the outstanding balance after each monthly payment?
What is NOT included in the closing costs of a real estate transaction?
What is NOT included in the closing costs of a real estate transaction?
What is the first step in acquiring a mortgage?
What is the first step in acquiring a mortgage?
What does the bank do once the mortgage loan is approved?
What does the bank do once the mortgage loan is approved?
Which entity is NOT typically a source of mortgage loans?
Which entity is NOT typically a source of mortgage loans?
When comparing two mortgage offers from different banks, which factor is least likely to affect your choice?
When comparing two mortgage offers from different banks, which factor is least likely to affect your choice?
What is the final step in the mortgage acquisition process?
What is the final step in the mortgage acquisition process?
What does a title check verify?
What does a title check verify?
In the mortgage selection process, how do you determine the preferable bank?
In the mortgage selection process, how do you determine the preferable bank?
What percentage of take-home pay is traditionally suggested to be spent on housing?
What percentage of take-home pay is traditionally suggested to be spent on housing?
What is the minimum increase in mortgage rates that banks must consider during stress testing?
What is the minimum increase in mortgage rates that banks must consider during stress testing?
Which factor should be evaluated when selecting a property’s location?
Which factor should be evaluated when selecting a property’s location?
What is a common action during the home buying negotiation process?
What is a common action during the home buying negotiation process?
What is typically required when obtaining financing for a mortgage?
What is typically required when obtaining financing for a mortgage?
What impacts the determination of a property's price?
What impacts the determination of a property's price?
Which amount is often suggested for a down payment when purchasing a property?
Which amount is often suggested for a down payment when purchasing a property?
What is a purpose of using a real estate agent in the home buying process?
What is a purpose of using a real estate agent in the home buying process?
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Study Notes
HK Property Market
- In 1997, many homeowners in Hong Kong had negative equity.
- Property prices reached their lowest point in 2003.
- The property market experienced rapid growth since 2009 due to low interest rates.
- The mortgage payment includes both principal repayment and interest charges.
- Amortization is a method for calculating a fixed repayment schedule over time.
Interest Charged on Mortgage Payments
- The formula to calculate the monthly payment is P = r(L) / (1 − (1 + r)−𝑛).
- Interest part for the 1st month = beginning outstanding balance x interest rate.
- Principal repayment for the 1st month = Monthly payment – interest part.
- Ending outstanding balance = beginning outstanding balance – principal repayment.
Mortgage Insurance Programme (MIP)
- MIP offers mortgage loans up to 80% of the property value for eligible applicants
- MIP requires only 20% down payment.
Taxes
- Hong Kong has a stamp duty on the sale or transfer of immovable property.
- Stamp Duty depends on the property value.
Alternative – Renting
- Advantages of renting: easier to move, fewer maintenance responsibilities, lower initial costs.
- Disadvantages of renting: no tax benefits, limitations on remodeling, restrictions on pets, legal concerns regarding lease, costs including a security deposit, utilities, and renter's insurance, not a permanent residence.
Rental Contract (Lease Agreement)
- The rental contract protects the lessor/landlord and the lessee/tenant.
- The contract specifies the monthly rent and due date, late payment penalties, lease duration, deposit requirement, renewal options, amount of security deposit, and the right to sublet.
Buy?Rent?
- To determine the lowest-cost alternative, compare the cost of renting with the cost of buying.
- Factors to consider: rent increases, mortgage rates, home appreciation rates, rate of return on invested funds, and non-monetary factors.
Should You Buy Your Home?
- Benefits of homeownership: financial rewards, psychological reward, lifestyle flexibility, and stability.
- Financial benefits include deducting property taxes and mortgage interest, potential increase in value, and building equity.
Home Affordability
- Traditional financial guidelines suggest spending no more than 25-33% of take-home pay on housing.
- Banks conduct stress testing by assuming a mortgage rate increase of 300 basis points (3%).
Home Buying Process
- Evaluate your homeownership needs.
- Find a property to purchase, including location selection, using a real estate agent, conducting a home inspection, and getting an appraisal.
- Price the property: determine the home price, calculate costs, and investigate mortgage types.
- Negotiate the purchase price: counteroffers, earnest money, contingency clauses.
- Obtain financing: apply for a mortgage, qualify for a mortgage, and understand guarantor roles.
- Close the transaction: sign documents, pay closing costs, including title check, attorney's fees, appraisal fees, property survey, stamp duty, and real estate commission.
How To Acquire a Mortgage
- Complete the application form and provide relevant documents.
- The bank will assess the appraised property value and your repayment ability.
- Upon approval, sign the Letter of Offer and the legal charge.
- The bank will disburse the mortgage amount to the seller.
- Receive a schedule of monthly mortgage repayments.
Sources of Mortgage Loans
- Sources include retail banks and mortgage brokers.
Mortgage Selection
- Factors to consider: Mortgage amount, Cash reimbursement, Interest penalty period.
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