Hong Kong Mortgage Insurance

The Hong Kong mortgage insurance program aims to promote home ownership through the provision of insurance coverage to approved sellers. The program, launched by government backed Hong Kong Mortgage Corp (HKMC) in 1999, aimed to provide insurance coverage for up to 30% of the value of the origination, thus enabling the banks to provide loans of up to 95% of the value of the property concerned.[br]

 

The Hong Kong mortgage insurance program aims to promote home ownership through the provision of insurance coverage to approved sellers. The program, launched by government backed Hong Kong Mortgage Corp (HKMC) in 1999, aimed to provide insurance coverage for up to 30% of the value of the origination, thus enabling the banks to provide loans of up to 95% of the value of the property concerned.[br]

 

Mortgage insurance allows banks to reduce the amount of mandatory down-payment to be made by borrowers without raising the risk for lenders. This encourages banks to boost their lending without jeopardizing the financial health of the banking system. So mortgage insurance is beneficial to both the borrowers and the lenders. 

Success of Hong Kong Mortgage Insurance

The Mortgage Insurance Program (MIP) was initiated with the approval of 26 approved sellers, which included several national and international banks. The program has been highly successful in the past ten years with over 65,000 families benefiting from it since its launch. However, the sharp increase in the prices of the high end residential properties has led the government backed organization to modify seal features of the program. The modifications to MIP are aimed at enhancing HKMC’s risk management ability, while discouraging borrowers from overstretching themselves in mortgage borrowing. The eligibility conditions, including the required loan to value ratio for seeking mortgage insurance, were also revised in October 2009. 

Features of Hong Kong Mortgage Insurance[br]

• The MIP covers only mortgages on residential properties that are owner occupied and thus promotes homeownership. The credit risk of mortgages on owner occupied properties is lower than that on investment properties.

• The cost of mortgage insurance can be paid up front or in some cases be added to the loan amount.

• The maximum available loan amount differs for self employed mortgage buyers and regular salaried people.

• Quick and easy processing through the internet.

• The minimum down-payment requirement gets reduced from 30% to 5% if the borrowers opt for mortgage insurance from any of the banks approved by the HKMC.

• HKMC is the insurer and the bank is the insured party not the mortgage borrower.

• Banks can make the decision regarding the percentage of insurance premium that can be passed on the clients.