AS the banking regulator didn't specifically provide a common defining of a second mortgage, banks are then left with creating their own different definitions.
Bank of Communications plans to treat each spouse individually in defining what a second mortgage is. For example, if an individual has already repaid a previous mortgage and then applies for a new mortgage, BoCom will treat the new application as a first mortgage, a senior executive of the Shanghai-based bank said yesterday. BoCom's practice is similar to rival China Everbright Bank.
Industrial Bank, on the other hand, intends to use the family unit in defining the second mortgage. For instance, if a husband holds a mortgage in his name, his wife's application for a mortgage - although new and separate from her husband's - will be treated as the second one.
A September 27 ruling from the People's Bank of China and the China Banking Regulatory Commission requires mortgage holders who apply for another home loan to make a down payment of at least 40 percent and pay a 10-percent premium on the interest rate.
For people seeking a third or fourth mortgage, the down payment requirement and interest rate should be even higher, with the actual figures determined by commercial banks.
Industry watchers said the central bank's move aims to drive out people who take up several mortgages for speculative purposes. But people who have already repaid their mortgages and plan to take a new one should not be included as they are not the target of the measure.