Pre-mortgage Must-read: Basic Stamp Duty and High Loan-to-Value Ratio Mortgage
Following the announcement of the 2024-25 Budget Address, no Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD) or New Residential Stamp Duty (NRSD) needs to be paid for any residential property transactions starting from 28th February 2024. In other words, whether you are a local or first-time homebuyer or not, everyone pays the same amount of stamp duty. To encourage a wider home ownership, banks can purchase mortgage insurance coverage which will enable the homebuyers to lower the down payment burden. This article explains the basic stamp duty and the high loan-to-value ratio mortgage to help you plan your budget and get ready for home ownership.
Ad Valorem Stamp duty (AVD)
After the government’s relaxation, ad valorem stamp duty (AVD) becomes the only property stamp duty in Hong Kong. Every homebuyer can pay AVD at the Inland Revenue Department’s Scale 2 rates, which can be as low as $100 depending on the property’s value.
| AVD for Homebuyers - Residential (Rates at Scale 2) | |
|---|---|
| Amount or value of the consideration (whichever is the higher) | Tax rate/ Tax Amount |
| Up to $3,000,000 | $100 |
| $3,000,001 to $3,528,240 | $100 + 10% of the excess over $3,000,000 |
| $3,528,241 to $4,500,000 | 1.5% |
| $4,500,001 to $4,935,480 | $67,500 + 10% of the excess over $4,500,000 |
| $4,935,481 to $6,000,000 | 2.25% |
| $6,000,001 to $6,642,860 | $135,000 + 10% of the excess over $6,000,000 |
| $6,642,861 to $9,000,000 | 3.00% |
| $9,000,001 to $10,080,000 | $270,000 + 10% of the excess over $9,000,000 |
| $10,080,001 to $20,000,000 | 3.75% |
| $20,000,001 to $21,739,120 | $750,000 + 10% of the excess over $20,000,000 |
| $21,739,121 and above | 4.25% |
For example, when purchasing a $8M residential property, no matter you are a local resident or first-time homebuyers or not, you are only required to pay 3%, or $240,000 AVD.
Note: For stamp duty details, information is sourced from Inland Revenue Department website, and may subject to change from time to time, please refer to the website for the latest information. Implementation of the measures and timeline should refer to the announcement by the government.
High Loan-to-Value Ratio Mortgage
Homebuyers can apply for a higher loan-to-value (LTV) ratio mortgage when purchasing a property for self-occupancy. First-time homebuyers who satisfy certain requirements may even apply for a mortgage loan of up to 90% loan-to-value ratio with mortgage insurance, so that they can purchase a property with as low as 10% down payment. According to the requirements, there is no asset restriction for first-time homebuyers, provided that they do not own any other residential property at the time of transaction. In fact, even if a person previously owned a residence but has since sold it, or jointly owned a property with others but had his/her name removed from the title deeds, they are still eligible as "first-time homebuyers" as long as they do not own any other residential property by the time of the transaction. Below tables summarizes the maximum LTV ratio of the new mortgage insurance plan and the traditional insurance plan.
| New mortgage insurance plan | |
|---|---|
| Property value | Maximum LTV Ratio |
| Above HK$4 million and up to HK$10 million | 80% or 90%* |
| Above HK$10 million and below HK$11.25 million | 80% - 90%* (subject to a loan cap of HK$9 million) |
| At or above HK$11.25 million and up to HK$15 million | 80% |
| Above HK$15 million and up to HK$17.15 million | 70% - 80% (subject to a loan cap of HK$12 million) |
| Above HK$17.15 million and up to HK$30 million | 70% |
| Traditional mortgage insurance plan | |
|---|---|
| Property value | Maximum LTV Ratio |
| At or below HK$4 million | 80% or 90%* |
| Above HK$4 million and below HK$4.5 million | 80% - 90%* (subject to a loan cap of HK$3.6 million) |
| At or above HK$4.5 million and up to HK$6 million | 80% (subject to a loan cap of HK$4.8 million) |
*A 90% LTV mortgage is only applicable to application with (i) all mortgagors not holding any residential properties in Hong Kong at the time of application and (ii) all applicants being regular salaried persons
The specific requirements on high LTV ratio mortgages are subject to mortgage insurance company’s terms and conditions. Approval is subject to final credit assessment and the final valuation of the property according to each individual case. For mortgage insurance programme cases, it is also subject to final approval of the related insurance company.
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