traineeinvestor
Thinks s/he gets paid by the post
The last payment on a small investment property is due to be paid in early June and I am considering whether I should keep the property mortgage free or remortgage it and invest the money elsewhere.
One of the reasons I am considering this is that Hong Kong uses an antiquated land title system that relies on a series of deeds to establish title. If you lose the documents they cannot be replaced and it becomes very difficult to prove title - in which event not only will I never be able to get a mortgage but I would take a significant haircut on sale (if I could find a buyer at all). It is next to impossible to get another safe deposit box in HK which means that if I have to keep the title deeds, the best storage I can arrange is a filing cabinet in my home.
One solution is to remortgage which means the bank keeps the title deeds. The mortgage lending environment is intensely competitive and I can get a new mortgage on 20 year P+I terms at about 2.3% pa which is a floating rate linked to HIBOR and reset monthly. (Fixed rate loans in HK are not readily available on attractive terms.) There is also a 1% cash back on drawdown which will cover my legal fees at least twice over. I don't need the money but could invest the loan proceeds in some short term bonds (3-5 years) where I am comfortable with the credit risk and can earn a positive carry even if there are a few interest rate hikes (and the loan would be serviced from the rental receipts anyway).
Tax is a non-issue in HK.
DW's endorsement will be sought before any action is taken.
Are there any other things I should consider?
One of the reasons I am considering this is that Hong Kong uses an antiquated land title system that relies on a series of deeds to establish title. If you lose the documents they cannot be replaced and it becomes very difficult to prove title - in which event not only will I never be able to get a mortgage but I would take a significant haircut on sale (if I could find a buyer at all). It is next to impossible to get another safe deposit box in HK which means that if I have to keep the title deeds, the best storage I can arrange is a filing cabinet in my home.
One solution is to remortgage which means the bank keeps the title deeds. The mortgage lending environment is intensely competitive and I can get a new mortgage on 20 year P+I terms at about 2.3% pa which is a floating rate linked to HIBOR and reset monthly. (Fixed rate loans in HK are not readily available on attractive terms.) There is also a 1% cash back on drawdown which will cover my legal fees at least twice over. I don't need the money but could invest the loan proceeds in some short term bonds (3-5 years) where I am comfortable with the credit risk and can earn a positive carry even if there are a few interest rate hikes (and the loan would be serviced from the rental receipts anyway).
Tax is a non-issue in HK.
DW's endorsement will be sought before any action is taken.
Are there any other things I should consider?