Mortgage Bonds for Foreigners

Financing Yourself

When we buy a property back home, one of the first things we would think of is financing. Even for those who have sufficient funding and liquidity for an acquisition, financing is often seen as a means of leveraging our investments. For buyers with less access to funding, financing is an indispensable vehicle they use to own that dream home. In this instance, Thailand is the same as any other country.

• Most of the financial institutions in Thailand provide loans for real estate purchases to local Thais and Thai companies based on similar criteria we are used to in our home country.
• However foreigners generally cannot mortgage properties in Thailand. In fact, mortgage lending by local banks to foreigners was virtually unheard of in Thailand.
• Nonetheless, in recent years we have seen a slight shift in policies to allow foreigners limited access to financing. This was instigated, in part, by the Thai government's eagerness to promote tourism and to encourage economic growth in Thailand.

Despite this, the momentum gained from the past few years has meant that some Thai banks do offer financing services to foreigners but impose rather strict terms and conditions on their availability such as;

• requiring the property to be held in the foreigner's own name
• if it is a condominium the property has to be registered as a condominium under the Condominium Act

Local Lending in Thailand

Banks in Thailand normally provide personal loans to individuals and this includes credit card facilities, business loans, personal loans for education or medical treatment as well as personal loans for general use such as the purchase of a condominium, renovations, car purchases and so on. These facilities are, subject to each bank's individual policy and available to foreigners if they have lived and worked in Thailand for a number of years.

In order to obtain these personal loans for the purchase of real estate, it is important to note that these loans are generally granted on the fair market value of the property and this is usually based on the bank's own valuation process.

There are some important criteria to qualify a foreigner to access bank loans are as follows;

• At least a 1-year work permit or a Thai resident permit.
• A letter of employment indicating their years of service in Thailand and their annual salary.
• Pay slips will usually be attached to this as well.
• The banks may also request for the employer's company documents
• The banks would also conduct credit checks on the foreigner
• The applicant's age combined with the loan period must not exceed 60 years.
• Applicants must have a stable and secure job.
• Applicants must have a fixed income three times higher than each installment repayment.
• The aggregate amortization of loan must exceed 7 years (for some banks).

The applicant may also be required to submit the following documents to the bank upon application;

• Copies of passport including visa page, ID card or government official ID card
• Marriage certificate of the applicant and spouse (if applicable).
• Confirmation of income or salary, and copies of bank statements
• Copies of land or unit title deeds, sale and purchase contracts

The interest rates for these types of loan are typically based on a fixed interest rate depending on the bank offer at the time. It is also helpful to note that because these loans are offered locally, the interest rates are usually a bit more competitive and it does pay to shop around first.

International Home Loan Schemes for Thailand

Around the middle of 2005, Thailand saw the emergence of a new financing service offered by Bangkok Bank's Singapore branch. At this time we saw Bangkok Bank starting to offer offshore financing for foreigners wishing to purchase real estate in Thailand. Up to 70% of the property's value was made available to foreigners who did not qualify for a local loan. This gave many foreigners access to finance for their dream homes even if they did not reside in Thailand.

Bangkok Bank in Singapore still offers such loans to foreigners as the demand for this is increasing.

• They are able to tender loans in several currencies including US and Singapore Dollars.
• A processing fee will also be incurred upon application. Bangkok Bank does insist on meeting the applicants in person and this means you would usually have to travel to Singapore to apply for this.

Bangkok Bank was the first bank in Singapore to offer such financing services. However, this year we saw the introduction of United Overseas Bank (UOB) in Singapore jumping on the band wagon and offering similar lending services to foreigners wishing to purchase real estate in Thailand.

• It is a relatively new scheme for UOB and it was introduced largely as an alternative to Bangkok Bank's hold on this lucrative market.
• At the moment, the terms for a UOB international loan are still very similar to Bangkok Bank with their interest rate. However, it appears their processing fee may be slightly higher but offers the advantage of applying for the loan locally in Thailand without having to set foot in Singapore.

Criteria for a Mortgage

Mortgages are governed under section 702 of the Thailand Civil and Commercial Code. There are certain rules which must be adhered to in order to qualify for protection under Thai law including the following:

1. The mortgager must have the right of ownership of the property.
2. The mortgage contract must be in writing and must be registered
3. The parties must register the mortgage to the authorized Officer for the following cases:
   1. Land With Title Deed

      has to be registered at the Land Department or Bangkok Metropolis Land Office (Branch) or Provincial Land Office or Provincial Land Office (Branch) where the land being mortgaged is located.

   2. Land With No Title Deed Such As Nor. Sor. 3

      has to be registered at the District Office where the land being mortgaged is located.