[photopress:realestate_block_1.JPG,full,alignright]If any borrower or co-borrower has a mortgage that has not been paid off that is a second mortgage. That is the ruling by the Beijing branch of Bank of Communications (BOCOM) and it seems eminently reasonable and understandable.
Zhang Xin, an official in charge of the credit management with the BOCOM’s Beijing branch said, ‘In Beijing, we will examine whether the loan applicant, either an individual borrower or a co-borrower, is trying to buy a second apartment. If any of the co-borrowers already has a house mortgage that hasn’t been paid off, the new loan application will be considered as a ‘second’ mortgage. It means the person will have to face a higher down-payment and interest rate. . . .
‘Co-borrowers can be couples, parents and children, and sometimes even people of no kinship.’
In late September, the People’s Bank of China, the central bank, and the China Banking Regulatory Commission jointly issued a new rule that requires mortgage holders who apply for another home loan to put a down payment of at least 40% and pay a 10% premium on their interest rate.
For people seeking a third or fourth mortgage, the down payment requirement and interest rate is even higher, with specific figures determined by commercial banks.
But the regulators did not closely define a ‘second mortage’ and in matters like this that is vital. The authorities have left the right of definition up to commercial banks themselves.
Lenders like China Construction Bank and Bank of China have taken a tougher line. They define a ‘second’ mortgage based on the family unit, which means if, say, the husband has already applied for a mortgage and the wife applies for a new loan on another property they will have to offer a 40% down payment according to the new rule.
The Bank of China even includes parents who intend to buy a second apartment in the name of their underage children into its list of ‘second’ mortgage applicants.
Another unclear point in the new rule is that whether it shall be apply to home owners who have already paid off their mortgage loans and plan to improve their living standard by buying a bigger apartment.
Most banks, including the big four state-owned banks, have all set detailed regulations to allow those who have paid up their mortgages to enjoy the original low down payment and interest rate when applying for new house loans.
Industry watchers suggest that by issuing the new rule, the central government aims to squeeze out speculative property buyers but not to hit home owners who wish to improve their own living standards.
Source: China View