Multiple banks told my wife if you get a loan to buy land, you cannot build a house on that land

[jakow]

This sounds absolutely mad, but multiple banks have told her the same story. They say they can give loans to buy land (chanote in our case), but you cannot build anything on the land after you buy it because it will change the value of the property. Has anyone encountered this before? It doesn't sound correct.

[David B in Thailand]

What is the name of the employee of Bangkok Bank who told your wife that? What branch. I can help, if you PM me or post what person and at what branch of Bangkok Bank said this. Loans are based on the borrower having provable income to pay back the loan, etc.. I am friends with a higher ranking person who just retired from Bangkok Bank. 

[jakow]

1 hour ago, David B in Thailand said:

What is the name of the employee of Bangkok Bank who told your wife that? What branch. I can help, if you PM me or post what person and at what branch of Bangkok Bank said this. Loans are based on the borrower having provable income to pay back the loan, etc.. I am friends with a higher ranking person who just retired from Bangkok Bank. 

Hey thanks for offering to help. We were actually just calling the customer service numbers and asking to be transferred to someone to ask questions about the loan. We didn't collect any names as we were just doing information gathering. We're still probably a year or two out from actually doing something, but my ideal situation would be we purchase the land first, recoup some funds, then build the house. Being told we wouldn't be able to build on the land we purchase was surprising and will definitely change our plans. I think my wife called three banks and they told her the same. Still, it doesn't sound right to me. But I guess that's par for the course here in Thailand.

[Puchaiyank]

I can not speak about Thailand in particular...but in my experience a bank will not loan money to build a home on land that has a lien...a loan...a mortgage...

 

Think about it...the bank would be investing in a building that could be required to be move or torn down if there is a default on the land loan...

[jakow]

4 hours ago, Puchaiyank said:

I can not speak about Thailand in particular...but in my experience a bank will not loan money to build a home on land that has a lien...a loan...a mortgage...

 

Think about it...the bank would be investing in a building that could be required to be move or torn down if there is a default on the land loan...

Yeah that makes sense, however we were not asking about a loan to build a house. We were only asking about a loan to purchase the land. They told us after purchasing the land we could not build anything on it.

[Puchaiyank]

8 minutes ago, jakow said:

Yeah that makes sense, however we were not asking about a loan to build a house. We were only asking about a loan to purchase the land. They told us after purchasing the land we could not build anything on it.

When the land is paid in full...in your misses name...no liens...you will get to build...until then it is too risky for a bank...

[jakow]

1 hour ago, Puchaiyank said:

When the land is paid in full...in your misses name...no liens...you will get to build...until then it is too risky for a bank...

Where is the risk? That's what I don't understand.

[Puchaiyank]

2 hours ago, jakow said:

Where is the risk? That's what I don't understand.

Before you meet with a lender, ensure that your property is eligible to secure a construction loan. There should be no encumbrances such as liens in effect.

From Googling:  Construction Loans...hope this helps...

[jakow]

2 minutes ago, Puchaiyank said:

Before you meet with a lender, ensure that your property is eligible to secure a construction loan. There should be no encumbrances such as liens in effect.

From Googling:  Construction Loans...hope this helps...

Yes, but we weren't talking about a construction loan. We were talking about a loan to purchase land. We didn't ask them about a loan to build a house on the land. They said we cannot build anything on the land.

[gk10002000]

8 hours ago, Puchaiyank said:

I can not speak about Thailand in particular...but in my experience a bank will not loan money to build a home on land that has a lien...a loan...a mortgage...

 

Think about it...the bank would be investing in a building that could be required to be move or torn down if there is a default on the land loan...

But that is the common practice in much of the world.  In the USA, you take out a loan to buy land and then later build a house on it, or more commonly you take out a loan and you buy the house and the land!  Of course the loan/mortgage includes the land.  Now if one just buys land, they may have different terms than buying land with a house on it already.  Pre construction loans may have higher interest rates.

[thedemon]

I'm pretty sure that the mortgagee's permission is not required in order to issue a construction permit. Certainly it isn't necessary to present the original chanote which is kept by the bank if the land is mortgaged. So I don't think that the bank would usually even be aware what you did or didn't build on that land. 

 

Generally speaking banks won't lend over 50% of the appraised value on bare land.

[Damrongsak]

TIT.  I can imagine them not want anything built on the mortgaged land.  Like a garbage dump, Haz-mat facility, meth lab & etc. 

[ColinChapman]

Can you buy the land and then remortgage to include the outstanding amount and the cost of building when you want to build the house? 

[kingstonkid]

No offense to anyone but history has shown me that talking to a voice in a call center is the worst thing you can do.  For those that have never had the honour a call center employee is not allowed to think.  They have a computer in front of them with a mouse.

 

You call and say I want to know about a morn\tgage for the land they click that button then another screen comes up they click the button that best corresponds to you.  If you want them to do something that does not have a button they will all tell you sorry you can not do that.

 

My advice is to go to one of the major branches and talk to a real person.  They will be able to assist you a whole lot better even if you are just fact-finding right now

[jakow]

9 minutes ago, tomazbodner said:

Makes sense to me. You take loan on the land. You build the house. You don't pay back the loan for the land. What happens with the house?

 

Pay off land loan and build whatever once land is in your name.

Then the bank gets the house as well. Seems like a win-win for them.

[AhFarangJa]

Another factor to throw into the pot is to make sure you can build on the land in the future. I am led to believe there are different coloured Chanotes for purely agricultural land, and land that can be developed. Sorry i am not more knowledgeable, just going on an experience a customer of mine had a year or so ago. Maybe someone on here has more facts to share.

[sometimewoodworker]

32 minutes ago, AhFarangJa said:

Another factor to throw into the pot is to make sure you can build on the land in the future. I am led to believe there are different coloured Chanotes for purely agricultural land, and land that can be developed. Sorry i am not more knowledgeable, just going on an experience a customer of mine had a year or so ago. Maybe someone on here has more facts to share.

You are partly correct, there are different land titles and the Garuda colour is different. But Chanote is one land title Name, it is not a generic name for a land title.

 

So there is only 1 land title called Chanote that is Nor Sor 4

 

The other titles include but are not limited to

Nor Kor 1

Nor Sor 2

Nor Sor 3

Nor Sor 3 Gor

Nor Sor 3 Kor

Nor Sor 4 (Chanote)

Nor Sor 5

 

Non land office issued documents 

 

Sor. Por. Gor. 4-01 (S.P.G. 4-01)

Sor. Tor. Gor. (S.T.G.) 

Por. Bor. Tor. 5 (P.B.T. 5)

Nor. Kor. 3 (N.K. 3)

Gor. Sor. Nor. 5 (G.S.N. 5)

[LivinLOS]

Just now, sometimewoodworker said:

You are partly correct, there are different land titles. But Chanote is one land title Name, it is not a generic name for a land title.

 

So there is only 1 land title called Chanote that is Nor Sor 4

 

The other titles include but are not limited to

Nor Kor 1

Nor Sor 2

Nor Sor 3

Nor Sor 3 Gor

Nor Sor 3 Kor

Nor Sor 4 (Chanote)

Nor Sor 5

 

Non land office issued documents 

 

Sor. Por. Gor. 4-01 (S.P.G. 4-01)

Sor. Tor. Gor. (S.T.G.) 

Por. Bor. Tor. 5 (P.B.T. 5)

Nor. Kor. 3 (N.K. 3)

Gor. Sor. Nor. 5 (G.S.N. 5)

But you also get red chanotes which are locked from sale (after upconverting titles) lots around me locked for 10 years with dodgy contract sales happening. 

[1FinickyOne]

land appreciates in value... buildings depreciate in value... easier to sell land w/o a crumbling structure... 

[sometimewoodworker]

4 minutes ago, LivinLOS said:

But you also get red chanotes which are locked from sale (after upconverting titles) lots around me locked for 10 years with dodgy contract sales happening. 

As I said 

 

4 minutes ago, LivinLOS said:

The other titles include but are not limited to

 

[Rod the Sod]

For what it is worth, as an ex-UK Bank Manager, they will lend for land purchase within their normal lending criteria e.g. 50%/75% of valuation etc. If you then build on the land and that becomes a liability there may be a legal requirement that the Bank takes remedial action i.e. demolish and make good. That could cost more than the value of the land so they will insist that any building has formal approval, including that of the Bank. How they enforce this in Thailand I do not know. In UK you cannot build without Planning Permission and so it is unlikely you can knock up something illegal without catching the attention of officials from somewhere.

 

I am not a Thai Bank Manager, but I would lend for the land purchase and insist that if you build the Bank approves the construction having had sight of all the permissions - after all, they effectively own the land through the mortgage.

 

A harmless process unless you are one who lives in the "grey area" and want to hoodwink the Bank, then build without planning permission and when it all goes wrong, do a runner and leave the Bank holding the baby. 

 

Cheers RtS

[Hank Gunn]

11 hours ago, Puchaiyank said:

Before you meet with a lender, ensure that your property is eligible to secure a construction loan. There should be no encumbrances such as liens in effect.

From Googling:  Construction Loans...hope this helps...

That's for a construction loan; a loan to build a structure. Of course banks would be reticent to loan money to build a structure on land that still has a loan in place. This has nothing to do with that.

 

For instance, someone could take out a loan to buy land. Sit on it and accumulate some cash, then build a house with that cash, all the while making timely payments on the original loan for the land.

[KKr]

Think the issue is that in Thailand the ownership of house can be with a different legal or natural person than the land ownership.

 

As suggested earlier, do something old fashioned and go to a local bank or Credit Union and talk to a loan officer. ( and suggest you try to find an English speaking bank employee so you know you understand what is being said. )

 

[DJ54]

Where is the property located?

[rickudon]

I could see scenarios where building on land could decrease it's value.

 

1. A structure which damages the land value.

 

2. A house which is sold on/rented to someone else. Now the bank has a sitting tenant who may be difficult to remove.

 

You can get a mortgage on land with a house, but if older house it is just the land value (minus clearance costs).

[natway09]

What you are saying is not quite true, the bank still own the land, but if you approach them for a building loan they can change the mortgage to accommodate presuming you have the required

incomes to repay the loan

[Tanlic]

6 hours ago, sometimewoodworker said:

You are partly correct, there are different land titles and the Garuda colour is different. But Chanote is one land title Name, it is not a generic name for a land title.

 

So there is only 1 land title called Chanote that is Nor Sor 4

 

The other titles include but are not limited to

Nor Kor 1

Nor Sor 2

Nor Sor 3

Nor Sor 3 Gor

Nor Sor 3 Kor

Nor Sor 4 (Chanote)

Nor Sor 5

 

Non land office issued documents 

 

Sor. Por. Gor. 4-01 (S.P.G. 4-01)

Sor. Tor. Gor. (S.T.G.) 

Por. Bor. Tor. 5 (P.B.T. 5)

Nor. Kor. 3 (N.K. 3)

Gor. Sor. Nor. 5 (G.S.N. 5)

My inlaws have Sor Por Gor chanote which appears to have been surveyed and has a Red Garuda is that normal?

[ThomasThBKK]

The bank will be the owner till it's paid here often, the chanote gets into their posession, that's why they say you can't build imho.

It wouldn't be possible to get a building permission for you if the land is in banks name?

[sometimewoodworker]

32 minutes ago, Tanlic said:

My inlaws have Sor Por Gor chanote which appears to have been surveyed and has a Red Garuda is that normal?

Your in laws may well have a Sor Por Gor land certificate but it is not a Chanote and AFIK cannot be converted to one, also it either can NOT be registered with the Land Department or it's transfer is restricted restricted (usually within the family)

 

I don't know much about non Land Department Garuda colours. I just know that Land Department titles usually have differing colours for the different titles

[elgenon]

On 4/29/2019 at 10:34 AM, gk10002000 said:

But that is the common practice in much of the world.  In the USA, you take out a loan to buy land and then later build a house on it, or more commonly you take out a loan and you buy the house and the land!  Of course the loan/mortgage includes the land.  Now if one just buys land, they may have different terms than buying land with a house on it already.  Pre construction loans may have higher interest rates.

Have you actually done this? I bought a house in the US. Later got a construction loan to tear down the original house and build 2 detached townhomes, then got 2 new loans (one on each property, the division of the debt was up to me) that paid off the original loan and the construction loan.