By ZENG Yanglin
China offers home buyers lower down payments and mortgage rates to support the housing market. In late August, the government asked cities and banks to change rules regarding buyers' and their families’ credit records so that more people would qualify for the favorable terms that first-time home buyers enjoy.
Each city issued its own policies. Beijing, Guangzhou, Shanghai and Shenzhen have made announcements.
The five biggest banks also clarified details.
Who qualifies for a first-time-buyer mortgage?
Anyone who has never bought a house can apply. If a buyer has already taken out a mortgage but would have qualified for a lower rate under the new policy, he or she can get a better deal either through negotiation or refinancing.
The buyer must live in the house, and should not use the house for commercial purposes.
The mortgage must be issued from a commercial bank. The lower rates do not apply to loans taken out from the Housing Provident Fund (a social-security style public fund that both employers and employees contribute to).
Under what circumstances can someone who already has a house get a lower rate?
If a buyer qualifies for a first-time buyer rate now but had to pay a higher rate when she took out the mortgage because of the old policy, she may negotiate a better rate or apply for refinancing.
For example, under the old policy, a buyer with outstanding loans but no properties would not qualify as a first-time buyer. Now he or she may refinance at a lower rate. Or if a child was assigned a high rate only because her parents had taken out a mortgage to buy a house, the child now would be able to get a better deal if her family had sold the old house. The specifics depend on the city.
There should be no difference in the new mortgage rate, whether the borrower chooses to negotiate a new rate or refinance.
How low can the mortgage rate get? I heard the central bank lowered the Loan Prime Rate recently. Will that affect me?
The Loan Prime Rate (LPR) is the baseline rate. Think of it as the rate a bank lends to an extremely low-risk customer. Your mortgage rate is LPR plus an assigned premium.
The central bank did cut the one-year LPR in August. But that’s a separate matter from the new mortgage policy, which gives qualified home buyers a lower premium than they would have gotten. For example, now the five-year LPR is 4.2 percent. The mortgage rate for a second home is 4.2 percent plus 80 basis points, which is 5 percent. But if a borrower now qualifies as a first-time buyer, she only has to pay LPR plus a very low or no premium. Her rate will be very close to 4.2 percent.
Each city has its minimum mortgage rate. The adjusted rate should not be lower than the minimum.
I’m late with my mortgage payments. Can I still apply for refinancing?
The short answer is no. But ABC, CCB and ICBC say they will consider the application if the borrower catches up on her payment.
I applied to pay off my mortgage early. Can I still try to get a lower rate?
The rate for the outstanding amount can be lowered if the buyer qualifies. If the buyer is approved for early payoff but no money has moved accounts, she may withdraw her application and try to get a better deal.
I would have got a lower rate for my current mortgage under the new policy. Can I ask for a refund for what I’ve already paid?
No.
When can home buyers apply for a new rate?
After September 25. All five banks say this is a priority, and that they have been working hard to prepare their systems.
