1. What refinancing is, and when to consider it
Refinancing moves an existing mortgage from one bank to another at roughly the same loan amount, to obtain a lower rate, a larger cash rebate or a longer tenor. Unlike a top-up, it does not release additional cash.
Three signals that it is worth looking: your penalty period (usually two to three years) has expired; market rates or rebates are clearly better than your current terms; or the valuation has risen, lowering your loan-to-value and unlocking better pricing.
2. Calculating the break-even
Break-even months = (legal fee + valuation fee + penalty − cash rebate) ÷ monthly payment saved. If that is shorter than how long you expect to hold the flat, refinancing pays.
On an outstanding HK$5M loan with 25 years remaining, moving from 4.35% to 4.05% takes the monthly payment from about HK$27,300 to about HK$26,500 — roughly HK$800 a month. Costs are around HK$12,000, and a 1.2% cash rebate is HK$60,000, so the rebate alone clears the costs and you break even immediately.
Inside a penalty period the picture reverses: early redemption penalties typically run 1% to 3% of the loan — HK$50,000 to HK$150,000 here — which usually outweighs any rebate. Ask your current bank for the exact figure before comparing offers.
| Item | Typical amount (HK$5M loan) | Note |
|---|---|---|
| Cash rebate | +HK$50,000 – 70,000 | Usually 1% – 1.4% of the loan |
| Legal fee | −HK$8,000 – 15,000 | Some banks offer a free solicitor scheme |
| Valuation fee | −HK$0 – 3,000 | Usually borne by the bank |
| Penalty (if inside the period) | −HK$50,000 – 150,000 | 1% – 3% of the loan |
| Monthly payment saved | +HK$500 – 1,500 | Depends on the rate gap |
3. The real costs
Legal fees: a new mortgage deed is required, generally HK$8,000 to HK$15,000. Free-solicitor schemes exist but usually require a deposit or payroll relationship and come with a lock-in.
Rebate clawback: having taken the rebate, you generally cannot refinance again for two to three years without repaying it pro rata. Rebate-hopping does not work inside the lock-in.
Mortgage insurance: premiums already paid on the original loan are generally not fully refundable; check the refundable portion with the insurer.
Sources: HKMA Residential Mortgage Survey and loan-to-value guidelines; Rating and Valuation Department private domestic price index. Terms, cash rebates and penalty periods differ by bank — rely on your own approval letter.
4. Timeline
Four to eight weeks end to end: application and income documents (3–5 days), valuation (2–5 days), formal approval and facility letter (1–2 weeks), then solicitors handle redemption and the new deed (2–4 weeks) before the new bank settles the old loan.
Nothing changes physically and the new bank picks up the payment in the month of transfer. Set the redemption date after the old penalty period ends — being a day or two early can trigger the charge.
5. Why applications are declined
Valuation has fallen and loan-to-value now exceeds the cap — the most common reason in a soft market. The bank will ask you to pay down principal first.
Income evidence or stress test: refinancing must clear the same debt-servicing ratio and the rate-plus-two-percent test. A job change, going self-employed or new borrowings all matter.
Building age: many banks cap age plus tenor, so an older building may be offered a shorter tenor and a higher monthly payment.
Title issues: illegal structures, unpaid-premium subsidised housing and village houses have far fewer willing lenders.