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We compare second mortgages from major providers in Hong Kong

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Second Mortgage refers to a mortgage borrowed from another lender on top of the original mortgage?s remaining balance.

Second Mortgage plans in Hong Kong are majorly provided by financial companies, property developers and property agents. Generally, maximum tenure of second mortgage is 20 years and the APR is 1-2% higher than general mortgage. Most of the second mortgages are ""P Plan"" and a few of them are ""H Plans"". To attract more customers, some of the developers offer discounted rates or ""Interest Free Payment Holiday"", and extend the repayment tenure to 25 years.

Most banks prohibit homeowners from taking out another mortgage on the same property, therefore many second mortgage plans in the market are processed without the bank?s endorsement, posing a certain risk on the homeowner?s part. If the bank realises there has been a breach of contract (including taking out an unauthorised second mortgage or obtaining a mortgage from a third party), it is entitled to exercise its right as stipulated on the contract, for instance, demanding an earlier repayment of the loan (commonly referred to as ?call loan?). However, second mortgage plans offered by property developers usually have the consent of the bank.
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Due to the high housing price in Hong Kong, more and more property buyers tend to apply for first and second mortgage at the same time to reduce the down payment amount. Interest rate of second mortgage, however, is generally higher than that of first mortgage, therefore appliants should carefully estimate the costs and their repayement ability before making a decision.

According to the guidelines issued by the Hong Kong Monetary Authority, applicants who apply for mortgages from banks have to pass a ""stress test"", in which the loan from both first and second mortgage would be calculated together. To pass the test, the borrower?s monthly mortgage payment cannot exceed 50% of household income under the current basis point; Assumed that mortgage rate increase of 200 basis points, and the resulted monthly mortgage payment cannot exceed 60% of the borrower?s household income.
Refinancing is to take out a new mortgage with the original mortgage lenders (i.e. banks or financial lending firms). Therefore, there is only one mortgage lender involved in the transaction. When the property value has appreciated, making remortgage based on the appreciated property is a cheap form of acquiring more cash with lost cost.

Second Mortgage is different from refinancing, as it is borrowed from another mortgage lender on top of the original mortgage?s remaining balance. If the mortgage borrower cannot pay off the mortgage and the property is auctioned, the first mortgage lender will be paid first. The second mortgage lender will only be paid if there is any money left. Because of this, the second mortgage generally has a higher interest rate.

All banks provide remortgage, but not all banks provide second mortgage.

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