Second Mortgage refers to a mortgage borrowed from another lender on top of the original mortgage?s remaining balance.
Second Mortgage plans in Hong Kong are majorly provided by financial companies, property developers and property agents. Generally, maximum tenure of second mortgage is 20 years and the APR is 1-2% higher than general mortgage. Most of the second mortgages are ""P Plan"" and a few of them are ""H Plans"". To attract more customers, some of the developers offer discounted rates or ""Interest Free Payment Holiday"", and extend the repayment tenure to 25 years.
Most banks prohibit homeowners from taking out another mortgage on the same property, therefore many second mortgage plans in the market are processed without the bank?s endorsement, posing a certain risk on the homeowner?s part. If the bank realises there has been a breach of contract (including taking out an unauthorised second mortgage or obtaining a mortgage from a third party), it is entitled to exercise its right as stipulated on the contract, for instance, demanding an earlier repayment of the loan (commonly referred to as ?call loan?). However, second mortgage plans offered by property developers usually have the consent of the bank.
