Understanding Hidden Costs in Property Purchases
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Purchasing a property is a significant financial decision. In addition to paying the down payment, it involves a series of additional costs, including legal fees, stamp duty, mortgage insurance, etc. Understanding the details of these costs can help buyers plan their finances well and avoid budget shortfalls during the transaction process.Legal Fees: Ensuring Smooth Transaction
In the property buying process, lawyers play a crucial role, responsible for reviewing the legal status of the property, handling sales contracts, transfer deeds, mortgage deeds, and other documents, and ensuring that the transaction procedures comply with legal requirements. Additionally, lawyers will also handle property searches, stamping, and other matters to ensure the buyer's rights are protected.
The calculation of legal fees is usually linked to the property price. According to market conditions, the reference prices for legal fees are as follows:
- Property price between 3 million and 6 million: Approximately 8,000 HKD
- Property price between 6 million and 10 million: Approximately 10,000 HKD
These fees may vary depending on the law firm's pricing standards, service scope, and region. It is recommended that buyers understand the fee details and service content in detail before hiring a lawyer.
Stamp Duty: An Unavoidable Cost in Property Transactions
According to the 2025 fiscal year budget, regardless of whether it is the first home purchase, all buyers now only need to pay the second standard tax rate, and for properties priced below 4 million, the stamp duty is significantly reduced to 100 HKD.
Mortgage Insurance Fee: Additional Expense for High Loan-to-Value Mortgages
According to the regulations of the Hong Kong Monetary Authority, banks must adhere to the loan-to-value ratio cap when approving mortgage loans for self-occupied properties. If buyers wish to obtain a mortgage of 70% or more, they must purchase mortgage insurance to reduce the bank's loan risk, while allowing prospective homeowners to successfully purchase a property with a lower down payment. The arrangement of mortgage insurance has been adjusted with policy changes, and currently, there are mainly two plans in the market: "Uncle Bo Plan" and "Old Mortgage Insurance".
The Difference Between "Old Mortgage Insurance" and "Uncle Bo Plan"
The Mortgage Insurance Program has undergone multiple adjustments over the years. Starting with the relaxation of the mortgage ratio in 2019 under the "Lam Cheng Plan," the government further optimized the policy from 2022 to 2024, introducing the "Uncle Bo Plan," which offers a higher mortgage ratio.
1. "Old Mortgage Insurance"
- Applicable to residential properties with lower prices
- Initially limited to residential properties priced at HK$6 million or below, but still available as an option
- The maximum mortgage ratio is 90% (depending on the property price and application conditions)
| Property Price | Below $4 million | $4 million – $4.5 million | $6 million or below |
|---|---|---|---|
| Maximum Mortgage Ratio | 90% | 80 – 90%; Loan cap $3.6 million | 80% |
| Property Type | Completed and uncompleted properties | Completed and uncompleted properties | Completed and uncompleted properties |
| First-time Homebuyer | Required | Required | Not required |
| Fixed Income | Required | Required | Not required |
| Maximum Repayment Ratio | 50% | 50% | 50% |
2. 「Uncle Bo Plan」(Effective from October 16, 2024)
- Properties priced at HK$10 million or below can apply for up to 90% mortgage
- Further reduces the down payment pressure for homebuyers
- Replaces the "Lam Cheng Plan" and becomes the latest high-ratio mortgage insurance scheme
| Property Price | $4M – $10M | Above $10M – $11.25M | Above $11.25M – $12M | Above $12M – $19.2M |
|---|---|---|---|---|
| Maximum Mortgage Ratio | 90% | 80 – 90%; Loan Cap $9M | 80% | 50 – 80%; Loan Cap $9.6M |
| Property Type | Completed and Uncompleted Properties | Completed and Uncompleted Properties | Completed and Uncompleted Properties | Completed and Uncompleted Properties |
| First-Time Homebuyer | Required | Required | Not Required | Not Required |
| Fixed Income | Required | Required | Not Required | Not Required |
| Debt Servicing Ratio Cap | 50% | 50% | 50% | 50% |
Fire Insurance: A Necessary Condition for Bank Mortgages
When banks approve mortgage loans, they usually require buyers to purchase fire insurance for the property. Fire insurance not only covers the risk of fire but may also include situations such as explosions, lightning, building collapses, and landslides, ensuring that the property is fully protected. The premium is approximately 0.1% to 0.15% of the loan amount.
Inspection Fee: Ensuring the Property is in Good Condition
For new buyers, property inspection can help ensure that the property is in good condition and avoid hidden issues. The inspection fee is generally calculated based on the property's area, with costs ranging from HKD 3 to 5 per square foot. If purchasing a new property, buyers can request repairs from the developer, as most developers provide a 6-month inspection period; however, for second-hand properties, the inspection results can be used as a basis for negotiation.
Other Miscellaneous Fees
In addition to the main fees mentioned above, there may be other additional expenses involved in the home-buying process, such as:
- Land Registry Registration Fee: For property transactions with a consideration not exceeding HKD 750,000, the registration fee is HKD 230; for transactions above HKD 750,000, the registration fee is HKD 450.
- Moving Fees: Depending on the distance of the move and the amount of items, fees can range from several thousand to tens of thousands of HKD.
- Renovation Costs: If the purchased property requires renovation, costs can range from tens of thousands to hundreds of thousands of HKD.
The expenses involved in buying a property are not limited to the property itself; there are various additional fees to consider. Therefore, buyers should prepare a detailed financial plan to ensure they have sufficient funds to cover all the expenses during the home-buying process, to avoid affecting the smooth progress of their property purchase plan.
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