Loan-to-value limits and down payment in Hong Kong

If you are buying a residential property in Hong Kong, the cash you need to bring to completion is not just the down payment. You must also pay stamp duty, legal fees, and estate agent commission. The loan-to-value (LTV) limit determines the maximum mortgage you can get, and since October 2024 the rules have been simplified. For a provisional sale and purchase agreement signed on or after 16 October 2024, the maximum LTV is 70% for all residential properties, regardless of the property’s value or whether you will live in it. This means the minimum down payment is 30% of the lower of the purchase price or the bank’s valuation. But the total cash requirement is higher.

How LTV works

LTV is the percentage of the property’s value that a bank will lend you. The bank uses the lower of the purchase price and its own valuation of the property. If you agree to buy a flat for HK$10 million but the bank values it at HK$9.5 million, the LTV is calculated on HK$9.5 million. So the maximum loan is 70% of HK$9.5 million, or HK$6.65 million, not 70% of HK$10 million. You must make up the difference with cash.

Before 16 October 2024, the rules were more complex. Higher-value properties had lower LTV caps, and non-self-use properties had a stricter limit. The HKMA removed these tiers. The maximum LTV is now a single standardised 70% for all residential property, as confirmed by the Hong Kong Monetary Authority (HKMA) in its press release of 16 October 2024. The HKMA described this as reverting to pre-2009 levels.

What changed in October 2024

Several restrictions were lifted on the same date:

• No more property-value tiering. Previously, properties above a certain value had a lower LTV cap. Now all residential properties are treated the same.
• No more self-use distinction. The LTV cap for non-self-use properties was lower. Now it is 70% regardless of whether you live in the flat or rent it out.
• No extra reduction for existing mortgages. If you already had an outstanding mortgage or had guaranteed someone else’s mortgage, the maximum LTV and DSR were lowered by 10 percentage points. That requirement has been lifted.
• Stress test suspended. The HKMA’s prescribed stress test — a stressed DSR limit assuming a 200-basis-point rise in interest rates — was suspended from 28 February 2024. Banks still assess affordability under their own credit standards, but the HKMA’s specific test is not currently applied.

Debt servicing ratio (DSR) limit

The DSR limit is 50% for all residential and non-residential property, for both self-use and non-self-use. This means your total monthly debt payments (including the mortgage) cannot exceed 50% of your gross monthly income. Before the change, non-self-use properties had a 40% DSR limit. Now it is a uniform 50%.

For loans assessed on your net worth rather than debt servicing ability, the maximum LTV was also raised from 60% to 70%, matching the debt-servicing-based lending limit.

Worked example: the real cash requirement

Assume you buy a flat for a hypothetical price of HK$8 million, and the bank’s valuation is also HK$8 million. The maximum mortgage is 70% of HK$8 million = HK$5.6 million. Your down payment is 30% = HK$2.4 million.

But you need more cash than that. Here are the typical additional costs:

So the cash you need is roughly HK$2.73 million, not just the HK$2.4 million down payment. Stamp duty alone adds HK$240,000 in this example. If you are not a first-time buyer, or if the property is your second home, the stamp duty rate is higher. Confirm the current stamp duty rates with the Inland Revenue Department (IRD).

If the bank’s valuation is lower than the purchase price, the down payment increases. For instance, if the bank values the flat at HK$7.5 million, the maximum loan is 70% of HK$7.5 million = HK$5.25 million. You need to cover the remaining HK$2.75 million of the purchase price yourself, plus the other costs. Your total cash requirement would be roughly HK$3.08 million.

What this means for your money

The simplified rules mean you can borrow more than before for higher-value or non-self-use properties. But the 70% cap still requires a 30% down payment. The removal of the extra reduction for applicants with other mortgages helps those who already own property or have guaranteed a loan. The suspended stress test reduces the income buffer banks require, but they still assess your ability to repay under their own standards.

Because the LTV is calculated on the lower of price or valuation, always get a bank valuation early in the process. If the valuation comes in low, you need more cash. Also, the DSR limit of 50% means your monthly mortgage payment (principal and interest) plus other debt payments cannot exceed half your income. Check your income and existing debts before you commit.

What to check or do next

• Confirm the current LTV and DSR limits with the HKMA or your bank. The figures here are based on the rules effective from 16 October 2024, but policies can change.
• Get a mortgage pre-approval from a bank. This tells you the maximum loan amount and the valuation they will use.
• Calculate your total cash requirement including stamp duty, legal fees, and agent commission. Use the current stamp duty rates from the IRD.
• Check your DSR. Add up your monthly debt payments and compare to your gross monthly income. If the mortgage payment would push you over 50%, you may need a smaller loan or a larger down payment.
• Consider the valuation risk. If the market is falling, banks may value conservatively. Have a cash buffer.

For the most current figures, refer to the HKMA’s residential mortgage guidelines and your chosen lender’s terms.