Is this a good home loan rate offered by a Thai bank?

[ubonr1971]

We have applied to KTB for a loan and they have come back and said the following schedule is what rate is on offer: (MMR is = 6.87%)

- for the 1st month to the 9th month: fixed 0.50%

- 10th to the 12 month is MRR minus 3%    i.e. 3.87%

- 2nd and 3rd yr of loan is MMR minus 2.75%    i.e. 4.12%

- and 'later' is MMR minus 2.30%   i.e. 4.57%

 

I'm assuming the MMR is completely variable and if the central bank of thailand lowers the rate then it goes down as well?

 

As a percentage of our loan amount the cost of the MRTA insurance is 1.66%.    Is this normal?

Finally, if the wife dies of pre-existing conditions during the MRTA period does this invalidate the insurance eg will the loan not be paid out? Do they actually ask for pre-existing health conditions prior to executing the insurance?

 

thanks so much if you can comment on any of the above

[Monomial]

The mortgage rates aren't bad. That is about what you will find in the market. The MRTA rate is horrible, but all MRTA is a scam in Thailand. If you can find a bank that does not require it, you are always better off. They can get away with such eggregious MRTA rates here because Thai life insurance itself is such a scam.

 

We found a foreign insurance carrier who would give a Thai national term life insurance as a rider on my policy. We then bought her insurance for the period of the mortgage, and shopped around for a bank who would do the loan without MRTA. Paid slightly higher interest rates for the actual loan, but not needing MRTA saved a bundle and we have dramatically better insurance coverage as a result.

 

 

[BritManToo]

5.87% is my repayment rate from SCB, just dropped from 6.12%

They didn't do MRTA, it was 1.5M life insurance for 20 years paid up front.

[legend49]

A Bangkok bank manager gave me a good tip. There are 3 Thai Government home loan banks that have very low rates for homes , around 3%. First 3 years the interest rate is kept low then balloons up after that period. So the HISO's borrow from one bank for 3 years, then move to the second bank, new loan at 3%, ditto for the third bank. Effectively capping your interest rate at about 3% for 9 years. Maybe a good idea if you have a Thai partner to do the inquiries.

[angloirishaussie]

Its good advice many Australians do this but watch out for exit fees and also changes in your circumstances that would make refinancing difficult and you are stuck with a higher rate 

[NightSky]

One thing to consider is that when my wife got a mortgage after the initial 3 years she wasnt then able to obtain another remortgage from elsewhere to transfer to another good rate after the initial 3 year period. It felt as if the banks were conspiring against us since she applied at 2 more banks and she seemed to meet the criteria but they all declined her which of course meant we had to stick with the same bank and the same mortgage on a higher rate.

 

It was the Government Savings Bank since that is the bank that was linked to an apparent promotion. My wife was also told the life insurance was mandatory which we didn't really want to buy.

 

Ive found if you can get around 4% rate over the 3 or 4 year initial term then that the going rate.

 

We were however able to secure another fixed term deal with the same bank which provides us with about a 4% rate again for 4 more years. 

 

Another suprize to me was that Thai banks don't calculate over payments like a UK bank would. I heard it was more like the US system although I dont know about that. Basically we paid down 50% of the loan in the first three years whilst the interest rate was low thinking this would lower our monthly repayment amount however the repayment amount didnt decrease-the monthly repayment amount.

 

To change the monthly repayment amount we needed to apply specifically to reduce the monthly payment amount and secure agreement from the 'people in the ivory towers' who we were never able to speak with and we could only send official requests to via the shop floor bank staff.

 

Oh and we needed to travel to the head office at the other side of Bangkok to make this application in persona at the head branch only -- other branches could not help and directed us to the head office branch which was literally at the opposite side of Bangkok.

 

Also, any early repayment penalties are based on the original loan amount even though we have paid down 50% of the loan and the 'new agreement' after 3 yers was for half the original amount borrowed.

 

Its a scam. Who can argue though!

 

The banks have it all sewn up and seem to have an unofficial agreement not to steel customers away following other banks moving from initial special offer deals -- my advice is only borrow in Thailand if you can afford to repay the loan in full at any time without concern.

[Monomial]

13 minutes ago, NightSky said:

 

It was the Government Savings Bank since that is the bank that was linked to an apparent promotion. My wife was also told the life insurance was mandatory which we didn't really want to buy.

 

 

 

This is the big scam you need to watch out for. You will find that many of the cheapest rates are only available with the "life insurance" or MRTA scam. Do not ignore how expensive this is. It is an absolutely horrible deal, and gives the banks huge hidden profits.

 

You can find banks which will not require the insurance, but the rates will be slightly higher, and you will need to put more money down. If you can qualify for one of these though, you will likely be better off. I would much rather have a 70% loan at a percentage point higher, than an 85% loan with a lower rate but subject to the insurance scam.

 

The life insurance, or MRTA, is an absolute scam in Thailand. Make absolutely sure you understand how awful it is when you are comparing rates.

[Monomial]

38 minutes ago, NightSky said:

Another suprize to me was that Thai banks don't calculate over payments like a UK bank would. I heard it was more like the US system although I dont know about that. Basically we paid down 50% of the loan in the first three years whilst the interest rate was low thinking this would lower our monthly repayment amount however the repayment amount didnt decrease-the monthly repayment amount.

 

This is not the US system either. It is specifically a Thai system, and it is actually a pretty good one. They keep your monthly payment fixed, always. Your loan *term* then expands or contracts based on the principal you still owe. In fact, you will find that they originally set your monthly payment so that you would pay off your loan in about 80% of time allocated. So a 30 year mortgage will be paid off in 24 years if everything stays the same. This way, if interest rates go up, you still have some buffer.

 

So when you made early repayments, you simply increased your buffer and lowered the total interest you have to pay over the life of the loan. If it was a 30 year loan to start with, you may find that now you will pay it off in only 15 years by sticking to the schedule.

 

Yes, you can apply to have your payment adjusted if things have significantly changed, but this is basically equivalent to writing a new loan. They'll need to calculate the balance remaining on your loan, the current anticipated pay off date, and how much of a buffer they want to include for future interest rate increases. The result of this will be your new payment. But you are always better off paying off the loan as quickly as you can, unless it is a very small loan and you need the mortgage interest deduction on your taxes.

[ubonr1971]

22 hours ago, NightSky said:

my advice is only borrow in Thailand if you can afford to repay the loan in full at any time without concern.

Im not trying to be contentious here after all you wrote above why did you finish with that comment? I think if the applicant has solid employment and serviceability then your comment is incorrect. 

 

In our situation we have high earning potential but we intend to rent it out and the rent will payback the loan every month. We intend to pay large extra payments as well. 

[ubonr1971]

21 hours ago, Monomial said:

 

This is the big scam you need to watch out for. You will find that many of the cheapest rates are only available with the "life insurance" or MRTA scam. Do not ignore how expensive this is. It is an absolutely horrible deal, and gives the banks huge hidden profits.

 

You can find banks which will not require the insurance, but the rates will be slightly higher, and you will need to put more money down. If you can qualify for one of these though, you will likely be better off. I would much rather have a 70% loan at a percentage point higher, than an 85% loan with a lower rate but subject to the insurance scam.

 

The life insurance, or MRTA, is an absolute scam in Thailand. Make absolutely sure you understand how awful it is when you are comparing rates.

Re your last sentence... life insurance is different to MRTA isnt it?   Am I correct in saying that the sole purpose of the MRTA is if the applicant dies then the loan is paid off in full. If this is the case then Im ok to pay this as a one off payment for 10 yrs of insurance. My wife is the bread winner in our family and it is a re-assurance if she passes that the building is paid out. I dont see this as a scam.  

[ubonr1971]

On 12/9/2019 at 6:54 PM, BritManToo said:

5.87% is my repayment rate from SCB, just dropped from 6.12%

They didn't do MRTA, it was 1.5M life insurance for 20 years paid up front.

Is MRTA just a one off large payment eg for 10 yrs of insurance based on the loan amount irrespective of the loan term. In our case we are going for a 30 yr loan term  and he says 10yrs mrta but didnt say if it was just a one off fee or annual. I thought I would check before asking him

[Monomial]

9 hours ago, ubonr1971 said:

Re your last sentence... life insurance is different to MRTA isnt it?   Am I correct in saying that the sole purpose of the MRTA is if the applicant dies then the loan is paid off in full. If this is the case then Im ok to pay this as a one off payment for 10 yrs of insurance. My wife is the bread winner in our family and it is a re-assurance if she passes that the building is paid out. I dont see this as a scam.  

 

MRTA is a type of life insurance that only covers the remaining balance of the mortgage and pays directly to the bank upon death. Basically, it is a term life insurance policy with decreasing payout as the years progress. It is grossly overpriced in Thailand.  It may not be a scam, but compared to what you can get term life insurance for on the international market, you are paying a huge premium for it.  You can get the same coverage amount for the same length for substantially less, and as a bonus not have the payout reduce as you pay off the mortgage.

 

I ran the numbers. I consider it to be a scam.