Raymond Chong

Concrete Analysis | What to do when a bank calls your mortgage loan? Don’t panic. The problem can be easily fixed

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Recently banks have been known to call or terminate a mortgage loan when you are in breach of the declared use of property and engage in cryptocurrency trading

If the bank calls your mortgage loan, you can refinance it with another bank. In the case of cryptocurrency, trade with a crypto-friendly bank instead

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Bank in Hong Kong have been known to recall mortgage loans of customers who fall afoul of certain rules. Photo: Shutterstock

Raymond Chong

Published: 12:01pm, 11 Jan 2022

For homeowners on mortgage, a bank calling your loan is probably the worst nightmare. For those who rent out the flat on mortgage insurance, or cryptocurrency aficionados, the call may come sooner than others. However, there is a solution.

Theoretically banks have every right to call loans anytime, practically arbitrarily, as stated in the loan facility letter. In reality, loan recall is extremely rare so long as one repays on time and fulfils the terms of agreement. Even during an eye-watering drop in the property market when loan becomes negative equity for banks, they tend to wait it out.

Recently, we have observed two common scenarios that could cause a bank to recall mortgage loans.

The first is when one breaches the use of property declaration. Property must be self-occupied by borrowers of loan-to-value (LTV) ratio above 50 per cent as the Hong Kong Monetary Authority (HKMA) requires. Renting out the property could lead to banks demanding full repayment, especially for loans covered by mortgage insurance programme (MIP), that is, LTV ratio higher than 60 per cent.

As a standard procedure, mortgage borrowers must declare property use during MIP application. After drawdown, both the bank and the Hong Kong Mortgage Corporation, under the HKMA, periodically require borrowers to re-declare self-occupancy with documentary proof, such as providing utility bills registered with the owners’ name.