What if a foreigner wants to buy a home in Thailand and get a mortgage to finance it? Is this possible?
To date, home financing has been limited to those foreigners legally working in Thailand. Historically, practically all property financing for foreigners has been in Bangkok and surrounding areas.
The fact that foreigners can only get mortgages to purchase condominiums is based on the fact that foreigners generally can't own land. According to Section 706 of the Civil and Commercial Code, property may be mortgaged only by a person who owns it. Though a foreigner can own a house on land, if the lease isn't extended, the house may have to be demolished. Given this possibility, a bank can't use such a property as security.
Comparison shopping for mortgages is important, so, if you're in the market, you should ask at more than one bank. Here are the mortgage rates of a few big banks as of Feb 28, just to give you an idea. Remember, these come with other charges, so you must compare the other charges, as well.
Bangok Bank
Krung Thai Bank
Kasikornbank
The Siam Commercial Bank
Bank of Ayudhya
TMB Bank
UOB (Thai) Company Ltd
CIMB THAI Bank
Standard Chartered Bank (Thai)
7.3750%
7.3750%
7.4800%
7.4250%
7.7500%
7.9000%
8.1250%
8.0000%
8.5000%
These are just to give you an idea of the rates, but we don't guarantee that they are available or accurate; you should check them yourself.!!
After filling out the loan application, a borrower has to execute two documents with the bank: the mortgage and the loan agreement. The mortgage is noted on the back of the condo's title deed when it is registered at the land office. It is an agreement that if the buyer defaults, the condo will be sold at public auction and the lender will be paid. The loan agreement covers the terms of the loan, for example the interest rate and when the payments have to be made.
Most banks prefer to execute the loan agreement in Thai, though some have English forms for their agreements, as well. The mortgage, because it's registered at the land office, must be in Thai. Needless to say, if you don't speak or read Thai, anything you sign in Thai should be reviewed and explained to you by your lawyer.
Documents filed at the land office may also be in both Thai and another language, in alternating paragraphs. You can specify which language is controlling, so you should select the one you understand.
The forms banks use for loans to individuals are subject to the Notification of the Consumer Protection Board on Contract, Re: Lending Business for Consumers of Financial Institutions, 2001. A few of the requirements of this notification are that:
Penalties and fees must be in writing and clear.
Notices to terminate by the bank, transfer of rights and notices required by law must be in writing.
How the bank terminates must be high lighted in the agreement.
The bank can't terminate unless it notifies the borrower and gives him or her the right to remedy any defaults.
If the bank changes the interest rate, it must give proper notice.
The font size of the loan agreement must be readable.
In addition to the above, banks are subject to the Financial Business Act, 2008, and they must adhere to the requirements of the Bank of Thailand about rates of interest, fees and penalties. Under this act, banks must publicly announce interest rates and service charges.
We not find a bank that would give mortgage loans to those over 65. Some, moreover, don't loan to people over 60. If you're retiring to Thailand, therefore, and planning to buy a condo, you probably won't be able to get a mortgage for it.
James Finch of Chavalit Finch and Partners (finch@chavalitfinchlaw.com)
and Nilobon Tangprasit of Siam City Law Offices Ltd (nilobon@siamcitylaw.com).
Researchers: Arnon Rungthanakarn and Sitra Horsinchai.
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at the email addresses above.
