[2026 Refinancing Guide] Is Switching to a Fixed-Rate Mortgage Worthwhile? Interest Savings, Cash-Out, LTV, Income Requirements and Valuation Tips
Mortgage refinancing means transferring an existing mortgage loan from the original bank to another bank. In recent years, many property owners chose to refinance in order to receive cash rebates. Banks have reduced cash rebates to relatively low levels in recent months, but many people still urgently need to refinance. This article explains the matters to note when refinancing and the reasons why refinancing may still be necessary even when no cash rebate is available.
AI Summary: A Guide to Property Refinancing in Hong Kong
This article introduces the definition, main reasons, application requirements, available cash-out amount and procedures for refinancing a Hong Kong property. Refinancing means transferring an existing mortgage loan to another bank. Common purposes include reducing interest expenses, obtaining cash-out funds, removing mortgage insurance, releasing a guarantor, and obtaining a cash rebate or a Mortgage-link account.
Latest mortgage offers for refinancing
In addition to mortgage offers from major banks currently available at HIBOR+1.3%, representing an actual mortgage rate of 3.25%, some banks also offer fixed-rate mortgages. When interbank rates remain high, a fixed-rate mortgage can reduce mortgage interest expenses. Whether you choose an H-plan mortgage or a fixed-rate mortgage, banks may also provide cash rebates. Please contact mReferral for details.
How many types of refinancing are there?
Balance-transfer refinancing: The remaining loan amount is transferred from Bank A to Bank B, with no change to the loan amount.
Cash-out refinancing: Another bank revalues the property, allowing the owner to release cash from the property’s appreciation for other purposes.
Maximum LTV ratios for cash-out refinancing
| Refinancing type | Standard maximum LTV | Mortgage insurance | Private mortgage insurance scheme |
| Cash-out refinancing | 70% | Up to 80% for properties valued below HK$6 million | 90% for properties of any value |
| Balance-transfer refinancing | 70% | Up to 80% for properties valued below HK$10 million; for properties valued at HK$10–17.5 million, up to 80% subject to a maximum loan amount of HK$12 million | 90% for properties of any value |
Refinancing does not require a stress test, but DTI requirements still apply
Regardless of the reason for refinancing, applicants previously had to undergo a mortgage stress test. After the Hong Kong Monetary Authority announced the suspension of the stress test in February 2024, applicants are instead assessed using the debt-servicing ratio (DSR), also referred to here as the debt-to-income ratio (DTI). Monthly mortgage payments must not exceed 50% of monthly income.
Why refinance?
1. Escaping a developer mortgage after the “Breathing Plan” stops breathing
Many buyers of new properties choose mortgage plans offered by developers. These plans help some people purchase a property more easily and generally offer relatively low interest rates during the first few years. Their rates may initially be comparable to market mortgage plans, but after the honeymoon period—usually three years—the interest rate can rise sharply, often exceeding 5%. Refinancing at the appropriate time can help borrowers escape the risk of high interest rates.
2. Removing mortgage insurance
Besides developer mortgages, using mortgage insurance to purchase a property is also very common. It can allow applicants to obtain an LTV of up to 90% for properties valued below HK$10 million. However, mortgage insurance involves a premium, and a property financed with mortgage insurance generally cannot be rented out. Removing the mortgage insurance can reduce interest expenses and allow more flexible use of the property. In addition, if the insurance is cancelled during the first year, up to 40% of the premium may be refunded; the refund may be 25% during the second year and 15% if the insurance is cancelled within the third year.
3. Obtaining a more favourable interest rate
Banks periodically offer preferential mortgage plans to high-quality customers. If your existing mortgage plan is no longer attractive, you may try refinancing to obtain a more favourable interest rate.
4. Releasing funds through cash-out refinancing
If a property has appreciated significantly and the owner wishes to release funds, refinancing may provide a way to do so. The amount available depends on the property’s latest valuation. The maximum mortgage amount under the refinancing arrangement, minus the outstanding mortgage balance, equals the maximum cash-out amount. Since valuations differ among banks, a mortgage brokerage can compare offers from different banks and help identify the bank assigning the highest valuation.
5. Releasing a guarantor
If a guarantor on the existing mortgage wishes to have their name removed, refinancing may be used to handle the change.
6. Earning a cash rebate
To attract refinancing customers, some banks offer cash rebates. You may contact mReferral directly to enquire about the amount available.
7. Obtaining a Mortgage-link account
If your existing mortgage does not include a Mortgage-link account, you may consider refinancing to a mortgage plan that does. This may help reduce mortgage interest expenses. Even if cash released through refinancing has no immediate specific purpose, it may be deposited into a high-interest mortgage-linked deposit account, or Mortgage-link. The deposit interest rate is equal to the mortgage rate, and the deposit balance may be as high as half of the outstanding mortgage balance. Because the account is a current account, funds can be withdrawn whenever needed. Some banks also allow the borrower’s family members to use the high-interest mortgage-linked account.
Example of cash-out refinancing
Assume that a property is currently worth HK$10 million and that the outstanding mortgage balance is HK$2 million. The maximum LTV for a HK$10 million property is currently 70%, giving a maximum mortgage amount of HK$7 million. The maximum cash-out amount would therefore be HK$5 million.
| Item | Amount |
| Current property value | HK$10,000,000 |
| Outstanding mortgage balance | HK$2,000,000 |
| LTV ratio | 70% |
| Refinancing loan amount | HK$7,000,000 |
| Available cash-out amount | HK$5,000,000 |
What requirements must be met for refinancing?
1. The penalty period must have ended
Most banks impose a penalty period on mortgage loans. The penalty provisions are set out in the facility letter issued by the bank. If a borrower repays early during the first year, a percentage of the loan amount may be payable as a penalty. The penalty is generally lower for early repayment during the second and third years. Some property owners formally apply to refinance only after the penalty period has ended or when it is close to expiry.
2. The property must have appreciated
People intending to refinance for cash-out purposes can release part of the property’s appreciation when the property value has risen. If the property has not appreciated, this may not be possible.
3. The valuation must be sufficiently high
If a bank’s valuation of the property is unfavourable, refinancing may not be worthwhile. Before applying, you can ask mReferral to check valuations from several banks and determine whether the refinancing objective can be achieved. Large mortgage brokerage firms maintain close relationships with various banks and finance companies and can help identify a suitable property valuation.
4. The DTI requirement must be satisfied
When a property owner originally used a developer’s “Breathing Plan,” a stress test may not have been required. However, refinancing still requires the borrower to satisfy the DTI requirement: monthly mortgage payments must not exceed 50% of monthly income.
Steps involved in refinancing
1. Prepare the documents
The refinancing application procedure is similar to that for a standard mortgage application. Applicants need to submit: (1) proof of income, such as an employment certificate, recent income records, bank statements for the salary account and tax returns; (2) the original mortgage loan agreement and proof of mortgage payments; and (3) proof of personal information, such as an identity card and proof of address.
2. Obtain bank valuations
Obtain valuations from several banks to find out which bank offers the most favourable valuation. Asking mReferral for assistance may be the quickest approach. A mortgage specialist will compare different mortgage plans based on the applicant’s objectives and assist in arranging property valuations with banks.
3. Appoint a solicitor
While the bank is processing the application, the applicant may identify a suitable solicitor to handle the refinancing. The solicitor will obtain the title deeds from the previous mortgage institution and conduct a land search. In general, applicants must find their own solicitor to handle the relevant procedures. Legal fees for refinancing generally start at several thousand Hong Kong dollars.
4. Sign the documents with the solicitor’s firm
The solicitor’s firm will contact the property owner to sign the deed of assignment and mortgage deed. After signing, the bank will transfer the loan and mortgage-related funds to the solicitor, who will then transfer them to the property owner and the original mortgage institution as appropriate.
Banks currently offer refinancing packages with rates as low as HIBOR + 1.3%, and may provide cash rebates based on the loan amount. If you would like to learn more about refinancing offers, call mReferral at 319-66688. A mortgage specialist can provide several refinancing plans for comparison and application.
Can the refinancing funds be handled without going through a solicitor’s firm?
In the past, refinancing funds had to pass through a solicitor’s firm. However, in November 2022, the Hong Kong Association of Banks announced that, for refinancing transactions involving residential properties, banks could provide timely and direct electronic transfers of mortgage-loan funds between one another, thereby avoiding payment-related risks.
Under the previous practice, when a refinancing transaction took place, the mortgage funds were first transferred to the solicitor’s firm for safekeeping. The solicitor’s firm would then issue a cheque to settle the customer’s original mortgage loan. Under the new payment arrangement, banks make timely and direct electronic transfers of mortgage-loan funds between themselves. This can avoid payment-related risks, such as customer funds being frozen unexpectedly, and can strengthen customer protection.
When can refinancing still be worthwhile during a rate-hike cycle?
Many people believe that refinancing cannot be worthwhile during a rate-hike cycle. This is not necessarily true. In a number of situations, refinancing may still be beneficial even when interest rates are rising.
1. Banks are offering substantial cash rebates
Many banks have resumed offering cash rebates for refinancing applications. You may contact mReferral for a free enquiry.
2. A developer mortgage is about to become expensive
The second situation occurs when a property owner originally used a developer mortgage to purchase a first-hand property. These plans typically have lower interest expenses during the first two or three years, but the rate may later rise to 5–6% or more. In such circumstances, refinancing may be the natural choice.
Who may not be suitable for refinancing?
For property owners considering refinancing, it is generally likely to be beneficial unless one of the following circumstances applies.
1. The loan is still within its penalty period
Mortgage plans commonly have a penalty period of two to three years. People considering refinancing should ideally wait until the penalty period has ended. This is why “refinancing once every two years” is a strategy used by many savvy property owners.
2. Income has fallen substantially
Refinancing means applying for a mortgage again. Applicants must resubmit income documents and undergo the relevant affordability assessment. If income has fallen substantially, the loan amount approved by the bank may be uncertain.
3. The borrower cannot remove mortgage insurance
If a borrower has mortgage insurance and wishes to remove it through refinancing, note that the LTV after refinancing may fall to 60%. If funds are limited, refinancing may therefore not be suitable.
If you are unsure whether refinancing is suitable for you, you are welcome to contact mReferral at any time and speak with a professional about your refinancing questions.
Why apply for refinancing through a mortgage brokerage?
The refinancing offers provided by each bank differ. Some banks may offer more competitive mortgage rates, while others may provide higher cash rebates. Contacting banks one by one can require considerable time and effort. mReferral can provide refinancing plans and the latest offers from major banks without charging customers a fee. Large mortgage brokerage firms also maintain close relationships with different banks and finance companies, allowing them to help customers obtain an appropriate property valuation.
mReferral Mortgage Brokerage Services has been established in Hong Kong for 25 years. If you have questions about applying for a new mortgage or refinancing, or about personal loans or credit cards, you are welcome to complete the enquiry form and contact a mortgage specialist to learn about the latest mortgage rates and bank cash rebates.
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