House bought by Thai citizen

[WebGuy]

Hello folks,

 

My Thai wife bought a house that costed around 880,000 THB ten years ago via bank with agreement to pay for it for 30 years through an installment plan.

Her installments initially for couple of years were around 5000 THB because of some subsidies but for the last several years her installment is 7300 THB.

 

What I am trying to figure out is how much money she will pour into the bank in these 30 years i.e. how much the profit of the bank is.

 

My thesis is that she will roughly pay back 2.47 million THB but she strongly argues that this is not possible because the portion of the interest is decreasing/increasing bla bla bla.

 

Then I said to her, Ok. If we cannot know whether your installment will be 7300 THB next 20 years, let's count how much money you paid back so far. She says, I don't know and again bla bla bla story comes.

 

Anyway, what I can start with is that we can roughly count how much money she has paid so far during the first 10 years so this is how I counted it. As her initial installments were around 5000 THB and now her installment is 7300 THB I would take a soft approach and say that the average installment is 6000 THB. This means that 120 months x 6000 THB = 720 000 THB has been paid so far.

 

Now, if we further hypothesize and say that all of her further installments will be 7300 THB for the next 20 years we will get 240 months x 7300 THB = 1,752,000 THB.

 

Considering the above mentioned, we can add 720,000 (first 10 years) to 1,752,000 (next 20 years) and this would equal to 2,472,000 THB (the money she would pour into the bank for the house that costed 880,000 THB 10 years ago which is almost 200% bank's profit).

 

Would you be so kind as to confirm whether my calculation is roughly fine or I am calculating something wrong here?

 

Thank you for your inputs in advance.

 

PS. I will somehow drive out the exact information about how much she has paid back gross during the first 10 years and report here.

 

 

[tonray]

Every year she should be getting a statement from the bank showing interest paid, loan balance due, etc. If not...just go to the bank and ask for one. Many Thai bank loans have varying terms depending on changes in market rates and usually a lower payment the first 3 years or so. Just get a statement...it's the best way to know. When she signed the loan BTW...they provided her with exactly the  parameters of how much interest and principal she would be paying.

[jackdd]

Should be about correct from your numbers.

Taking this calculator: https://www.thailand-property.com/loan-calculator

If you put in 880k with 7.5% (you say she is paying about 6k per month) interest rate, it results in about 2.2 million total.

[Peterw42]

Its a mortgage, they are the same all over the world.

There are plenty of mortgage calculators, on websites etc, that can calculate the amounts.

https://www.mortgagecalculator.org

Any mortgage in the world you end up paying back a whole lot more than you borrowed, thats the price of a mortgage. The same amount of money invested over the same term would give a similar return.

 

The bank has to get the money to lend out from somewhere, pay interest etc, so they are not making a pure profit. The pay out 2% on the money then lend it out at 3%. etc

 

Most properties will have a capitial gain over the term of the mortgage, often bigger than any interest paid.

[bkk6060]

Geez, that sounds like her total mortgage owing is low.

Why don't you just pay it off for her?

 

[ezzra]

Are you trying to figure out how much money did the bank profited from the loan, well, plenty and than some,

the crux of the matter was your wife wanted a house at any cost and will to pay for it, and she did, and instead to dwell on the past, pay the balance ASAP and tell the bank to go *&%$ themselves...

[BritManToo]

36 minutes ago, bkk6060 said:

Geez, that sounds like her total mortgage owing is low.

Why don't you just pay it off for her?

 

Paying off a  woman's debts is rarely a good idea.

They will either, take out more debt, or dump you because they only needed you to repay  the debt.

As for the OP mortgage question, normal repayment is 2x-3x the original loan.

[robblok]

It could be what you just wrote down but then the interest is quite high above 8% and I havent paid that in the past (in Thailand). I think that she might have had a higher original amount. Still your numbers can be about right you always pay a lot for a mortgage but its over 30 years so its not too bad.

[FritsSikkink]

There is probably an insurance included too for when she dies before the loan is paid off.

[WebGuy]

Thank you guys. Your inputs are useful references I can use to extend my research and make decision.

Generally, if 200% needs to be paid on the top of the property price, it would be good to get into a deal with bank with 60 - 70% with my money, maybe.

I have some investments that generate some income and if I would cash this out, I would be able to buy a property but then I am down to zero which I would not be convenient with.

I think I will wait for approximately 3 years and then get some money out and get into a deal with bank with 60 - 70% with my money and still have some investments that will generate income.

 

Anyway, I will try to clear out with my wife how much she has paid so far and this could be a useful reference for some Thai Visa forum.

 

[khunPer]

On 12/27/2020 at 3:18 AM, WebGuy said:

Considering the above mentioned, we can add 720,000 (first 10 years) to 1,752,000 (next 20 years) and this would equal to 2,472,000 THB (the money she would pour into the bank for the house that costed 880,000 THB 10 years ago which is almost 200% bank's profit).

 

Would you be so kind as to confirm whether my calculation is roughly fine or I am calculating something wrong here?

 

Thank you for your inputs in advance.

That sounds fairly correct, it expensive to buy/build for borrowed money paid over very long time, which 30 years is.

 

In years with high inflation – like it was in the 1970s and first half of 1980s with in average 10 percent a year in the Western part of the world – you lost money if you didn't borrow and build house, or extended your existing house. The saying was that the first two-three years were hard, and then it became affordable and laughingly cheap; i.e. in relative buying power your payback value would be reduced by around 10 percent every year, whilst you property value raised with about same percentage, so even you paid a fairly high-sounding interest of 12-15 percent, it was relative cheap to borrow.

 

Now we have had more than a decade with extremely low inflation, around one percent or less a year, so borrowing money is relative expensive, even the interest sounds affordable with some six to seven percent a year.

 

The good old saying that "it's expensive to be poor" is quite correct.

[Stevemercer]

The longer the loan term, the more expensive the payback. You can pay extra each month (this goes to paying off the principal and can dramatically reduce the loan term).

[chrisandsu]

When I bought my house 12 years ago for $285k at 5% interest the mortgage calculator worked out I would pay back $750k over 30 years . It’s a bitter pill to swallow . Not sure why her mortgage went up ? A variable interest rate maybe ? Or took another loan out on the property ? 

[flexomike]

On 12/27/2020 at 9:18 AM, WebGuy said:

Hello folks,

 

My Thai wife bought a house that costed around 880,000 THB ten years ago via bank with agreement to pay for it for 30 years through an installment plan.

Her installments initially for couple of years were around 5000 THB because of some subsidies but for the last several years her installment is 7300 THB.

 

What I am trying to figure out is how much money she will pour into the bank in these 30 years i.e. how much the profit of the bank is.

 

My thesis is that she will roughly pay back 2.47 million THB but she strongly argues that this is not possible because the portion of the interest is decreasing/increasing bla bla bla.

 

Then I said to her, Ok. If we cannot know whether your installment will be 7300 THB next 20 years, let's count how much money you paid back so far. She says, I don't know and again bla bla bla story comes.

 

Anyway, what I can start with is that we can roughly count how much money she has paid so far during the first 10 years so this is how I counted it. As her initial installments were around 5000 THB and now her installment is 7300 THB I would take a soft approach and say that the average installment is 6000 THB. This means that 120 months x 6000 THB = 720 000 THB has been paid so far.

 

Now, if we further hypothesize and say that all of her further installments will be 7300 THB for the next 20 years we will get 240 months x 7300 THB = 1,752,000 THB.

 

Considering the above mentioned, we can add 720,000 (first 10 years) to 1,752,000 (next 20 years) and this would equal to 2,472,000 THB (the money she would pour into the bank for the house that costed 880,000 THB 10 years ago which is almost 200% bank's profit).

 

Would you be so kind as to confirm whether my calculation is roughly fine or I am calculating something wrong here?

 

Thank you for your inputs in advance.

 

PS. I will somehow drive out the exact information about how much she has paid back gross during the first 10 years and report here.

 

 

Why don't you just pay off the loan

[JH1967]

 

Your wife seems to be happy just being able to get a finance on the house and pay whatever the bank ask her to pay not paying any attention to the terms nor what is left to be paid. This is unfortunately quite normal (and not only in Thailand).

 

I would suggest the first step to be to find the contract and go through it with her (yes, i know this can be unpleasant for both of you - but if you wish to help her, (both of) you need to know the terms of the contract).

 

Then get your wife to ask the bank what the current interest rate is on her loan. If you did not finalise step 1, your wife should also ask if the interest is fixed or variable.  She should ask for a bank statement so you can see how much debt is remaining. She should also ask if there are any insurances included in the contract.

 

Step 3: consider re-finance. The interest rate has during the last ten years gone down significantly - so why not try to get better terms.

 

Most of the Thai people i know with a property loan has obtained it in GH Bank. GHB usually issue loans with a reduced interest rate for the first +- 3 years - the reduced rate is around 3 %. After 3 years the rate is significantly higher 5-6 %, however the people I know they re-finance after 3 years getting a new loan with a reduced rate for 3 years - of course i do not know the details so i do not know the conditions for a re-finance or the costs involved - but AFAIK this is what Thais are doing. So you should be looking into this possibility.

[Pmbkk]

On 12/27/2020 at 3:44 AM, BritManToo said:

Paying off a  woman's debts is rarely a good idea.

They will either, take out more debt, or dump you because they only needed you to repay  the debt.

As for the OP mortgage question, normal repayment is 2x-3x the original loan.

 

I paid off the remaining of my wife's mortgage - was 1 million.

We have a few apts in Bangkok Rama2/3/4.

I looked at the price of the interest and it was much easier me paying it off in one go than paying for it over 20 yrs. Makes economic sense - and I've worked for banks for 25 years...

 

If they work for any govt post, they get a reduced rate at the government bank. I think you need to have it for 2 years and then you can pay it all off. As she's a doctor they all have to work for the government after graduation.

 

That was 12 years ago.

 

She's never asked for money and in London takes a much lower paid job just so she has spending money and never asks me for money. Sometimes I believe Thai women get a bad reputation as money grabbers!!

[mvdf]

Wow. I should start a loan service. Such ginormous interest x countless other customers taking out loans can make one incredibly rich.

 

On second thought, 30 years seems forever.  

[chrisandsu]

26 minutes ago, mvdf said:

Wow. I should start a loan service. Such ginormous interest x countless other customers taking out loans can make one incredibly rich.

 

On second thought, 30 years seems forever.  

Don’t forget the banks are getting the money from the government at close to 0%. If you lent money at the rates banks do you would be considered a loan shark .