The Housing Authority said at a meeting the other day that it would review the existing HOS application and flat selection mechanism, and among other things, it would consider allocating 30% of the quota for priority selection for applicants under the Elderly Persons Scheme to various housing estates on an equal basis, so as to give applicants from one-person or small-sized families a better chance of selecting the large flats of their preference. Another key point is to consider extending the mortgage guarantee period for aged second-hand HOS flats.
At present, for those who purchase second-hand flats under the Housing Authority's Home Ownership Scheme (HOS) through the White House II Scheme at nil premium, they can take out a mortgage of up to 90% of the value of the flat, with a repayment period of up to 25 years, and they can choose between a P or H mortgage plan. With the HA's guarantee, banks generally do not require buyers to pass a stress test when approving mortgages.
However, as many second-hand HOS flats are getting older, their remaining mortgage guarantee period is diminishing. Under the existing mechanism, if the date of first sale of a White House II flat is within 19 years, the bank can normally approve a mortgage of up to 90% of the flat's value with a maximum repayment period of 25 years, while if the date of first sale is more than 19 years, the bank has the opportunity to reduce the mortgage loan-to-value ratio or repayment period.
For example, if a buyer purchases a second-hand flat in Yu Chui Court in Sha Tin through Pak Kui No. 2, the year of occupation of the estate is early 2001, i.e. the age of the flat is 22 years, the current transaction price is $5 million, and the mortgage rate is 3.625%, because the age of the flat is more than 19 years, the buyer can still bear 90% of the mortgage in the end, but the maximum term of the mortgage is only 22 and a half years, and the monthly instalment is about $24,400, which is about $22,800, comparing with the maximum term of 25 years, which is about $22,800, and the mortgage payment is about $24,400. Compared with the maximum 25-year repayment of about $22,800, the monthly repayment will increase by $1,600 (7%).
In addition, if the flat is 24 years old or above, the bank can only approve a mortgage of 70% at most, and the applicant has to undergo a stress test. Moreover, the applicant is not allowed to apply for a higher loan-to-value ratio through mortgage insurance for HOS flats with premium not yet paid, which means that the older the HOS flat, the higher will be the burden of downpayment expenses and mortgage repayment at the same time. If the Government can relax the mortgage loan guarantee period for older HOS flats in the secondary market in response to the current situation, it will not only alleviate the burden of home ownership and mortgage repayment on low- and middle-income families, but also facilitate their access to public housing, and at the same time promote the circulation of HOS flats in the secondary market.
