The law of Thailand provides for mortgage contracts under Book 3, Title 12 of the Civil and Commercial Code. Section 702 thereof states that a mortgage is a contract whereby a person, called the mortgagor, assigns a property to another person, called the mortgagee, as security for the performance of an obligation. The mortgagee is entitled to be paid out of the mortgaged property in preference to ordinary creditors regardless of whether or not the ownership of the property has been transferred to a third person.
Immovable property of any kind can be mortgaged. However, the following movable properties may be subject to mortgage provided these properties are duly registered:
- Ships or vessels of more than five tonnage;
- Floating houses;
- Beasts of burden; and
- Any other movables with regard to which the law may provide registration for that purpose.
Below are the following points you might need to know about property mortgages in Thailand:
- Foreigners must consult with a property lawyer before taking out a mortgage in order to purchase any type of real estate in Thailand. In this instance, foreigners can be apprised of the applicable loan and mortgage scenarios in the country as well as they may be advised on the relevant laws and regulations regarding mortgage of property. This is particularly true in the case of both condominium units or houses.
- In regards to condominium units, the Condominium Act of 1979 and a Land Department regulation issued in 2004 require that non-resident foreigners (i.e. any foreigners without permanent resident status) must transfer foreign currency into Thailand and convert it into Thai baht in an amount no less than the purchase price of the condominium unit.
- The preceding rule (Condominium Act of 1979 and a Land Department regulation) presents difficulties for foreigners who wish to apply for a mortgage in order to finance their purchase of a condominium. Any foreign national interested in obtaining financing may have to contact a local Thai bank who is able to assist in providing a loan issued in foreign currency which is transferred from overseas.
- As for financing such properties as houses or villas, an important legal issue is presented due to the fact that the foreigner may not actually own the land underneath the structure and therefore cannot offer such land as collateral for the mortgage.
Furthermore, foreigners may face difficulty in obtaining approval for a mortgage from a Thai bank since they are not residents in Thailand and do not have a permanent domicile here.
Those who are interested in obtaining a mortgage in order to finance the construction of a house or villa on the leased property should seek proper legal consultation before proceeding.
In recent years, Thai Banks have taken advantage of Thailand’s increasing approval as an international property investment destination. These days, foreigners have mortgage options from a relatively wider choice of lenders. However, access to these financial products still remains severely restricted and loan conditions imposed are generally less favorable than local buyers.
Residential property financing options are likely to remain limited in the coming years. Potential homebuyers and investors are advised to inquire directly with lending institutions to check their eligibility as well as for the foreign buyers’ security. In most cases, mortgage approval for foreigners is done on a case-by-case basis with no guarantees; applications are based on the applicant’s personal finances and circumstances. Normally, foreign buyers in Thailand are likely to make upfront cash payments.
Criteria for a Mortgage
Mortgages are governed under the provisions 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:
- A contract of mortgage must specify the property mortgaged.
- The mortgager must have the right of ownership of the property.
- A contract of mortgage must contain, in Thai currency, either a sum certain or a maximum amount for which the mortgaged property is assigned as security.
- The mortgage contract must be in writing and must be registered.
The parties must register the mortgage to the authorized Officer for the following cases:
- 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.
- 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.
If you have questions related to mortgages in Thailand, please feel free to contact us.