Advertisement
Hong Kong property
Business
Raymond Chong
Raymond Chong

Concrete Analysis | Planning to apply for a UK mortgage? Watch your spending and choose property wisely

  • You can apply for a UK mortgage directly from a Hong Kong bank, but only for properties in London’s zones 1 and 2
  • As most Hongkongers purchase UK property for buy-to-let purposes, applying for a buy-to-let mortgage is an alternative route

Reading Time:3 minutes
Why you can trust SCMP
UK banks are notorious for being too conservative when it comes to property valuations, Raymond Chong says. Photo: AFP
Raymond Chong
Hongkongers have been busy aggressively snapping up homes in the United Kingdom ahead of a January 2021 application process that is expected to give the green light to British citizenship for them. Their favourite destinations have been the cities of London, Manchester and Birmingham.
Advertisement

To fund these home purchases, most buyers rely on refinancing their Hong Kong homes for down payments, and then rely on a UK mortgage to finance the rest. In this article, I will offer some recommendations based on my own experience of applying for a UK mortgage.

Applying for a mortgage from a UK bank can be a daunting task, as its approval criteria can be vastly different from that of a Hong Kong bank. Hence, naturally, readers will ask: “Can I apply for a mortgage for my UK home from a Hong Kong bank?”

The answer is: yes, you can apply for a UK mortgage directly from a Hong Kong bank, but only for properties in London’s zones 1 and 2. OCBC Wing Hang Bank is one of the banks in Hong Kong that offers the service. It adopts a similar approval criteria as a mortgage application for a Hong Kong home.

If you purchase a house outside London’s zones 1 and 2, then applying for a mortgage from a UK bank or the UK branch of a Hong Kong bank are your only choices. Things can get tricky. In Hong Kong, the debt to income ratio (DTI) is 50 per cent. Namely, your monthly debt payments cannot exceed 50 per cent of your total income, and this standard is applied by all banks. However, in the UK, this ratio varies depending on the bank’s policy. In general, UK lenders cap the DTI ratio at 35 per cent. If your DTI ratio gets close to 50 per cent, many banks may be reluctant to lend, or will need to raise the interest rate. For homebuyers whose DTI ratio is more than 60 per cent, you may have a hard time finding a lender.

03:14

UK unveils details of citizenship offer for Hongkongers with BN(O) passport holders

UK unveils details of citizenship offer for Hongkongers with BN(O) passport holders

To make things more complicated, lenders will also assess what level of monthly repayments you can afford, after taking into account various types of personal and living expenses, and possible changes to your lifestyle. This is called an affordability assessment. For example, if your credit card statement reveals that you consistently spend a significant amount of money on clothing, recreation and childcare, they may include this spending into the numerator of the DTI ratio. If your statement shows that you have to pay tuition fees for your children, that is likely to be considered as debt as well.

Advertisement