Cancellation/early settlement of mortgage

[damascase]

My father-in-law borrowed money from an agency, with the title to his land and house as collateral. To that end he signed a mortgage contract, stating that the interest would be 15% per year (the legal interest limit in Thailand). The contract itself does not contain anything regarding the duration of the loan or the terms of repayment, other than that the interest should be paid monthly. 

Apparently he was told - outside the contract so he didn’t sign for it - to repay in 36 months, with the total amount to be repaid being the borrowed amount plus 3x the yearly interest. I’m not sure this is legal, as in my view it raises the actual interest above the legal limit, but he didn’t contest this at the time. His financial/legal insight/knowledge is close to zero.

Now, at the end of the first year, it appears he is four months behind and he got a letter from a lawyer hired by the agency that the contract is to be canceled . He is given the choice between paying the remaining 28 months in full within 60 days or loose his house and land.

It was only at that point that I learned about it. He didn’t really understand the situation he got himself into, he hadn’t understood the consequences of the contract, nor had he read any of it. He had just signed where they told him to sign.

I’m looking for ways to help him out of this mess and to avoid him loosing his land and house. One option is that I just pay the demanded amount in full and subsequently arrange for him to repay me over a much longer time and without interest.

However, that raises some questions as to the correctness of the sum to be repaid. Seeing that the actual contract doesn’t say anything on duration, or on the terms of repayment or on cancellation/early settlement, it doesn’t seem right to have to pay 3 years interest when settled and fully repaid after one year. Of course there will be a legal default interest for the four missing installments, I do understand that, but it’s the 2x 15% interest I’m having problems with to accept.

Anyone out there able to shed their light on this? Grateful for any constructive comments!

 

Edited October 2, 2022 by damascase

[KIngsofisaan]

1. work out an agreement with the lawyer in writing for the total amount to be paid off.

 

2. Ensure the house and land is worth the amount owed.

 

3. Assess if/when if the house/land is taken, would they be able to turn it quick for cash, would they have to hold on to it, or would they rather have his house and land versus a cash payment?

 

Tough situation but I assume those holding the note want to get paid

 

It will all come down to your negotiating skills should you agree to settle for him.

 

If you believe the interest rate is above the legal limit, threaten the lawyer to go to the police with that evidence and force him to settle.

 

 

Edited October 2, 2022 by KIngsofisaan

[BritManToo]

Pay the money owing on the condition the property is immediately transferred to your wife, but he can live there for the rest of his life. Else walk away, it's not your business.

 

That's what I did for my MiL playing the same game.

Any of your wife's brothers/sisters don't need to know.

Cost me 100kbht, my wife gained a property worth 500kbht.

[KhunLA]

Aside from renegotiating to meet BM2 transfer thoughts, get a lawyer to tell you exactly what the FIL signed.  What he is stating does sound illegal, and surely not in writing.

 

People need to read the loan agreements very carefully.  My daughter's mortgage is written in a way, that it would never be paid off in her life time.  Builder/bank offered low 'grab in' interest based on 30 yr amortization ... BUT ... needs to be refinanced every 3 yrs, for another 30 yrs, if using them again.

 

That's just silly. as I worked the present #s, and at the end of 30 yrs, she would still owe half the mortgage amount, instead of being paid off.  We'll finance it after the first 3 yr contract expires, and with the rent income, and extra 10k toward principle, she'll own it < 11 yrs later.  So a 14 yr mortgage, renters paying ~66% of it.  She has a 'free-ish' house, or enough income to almost live on.

https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php#top

 

 

Edited October 2, 2022 by KhunLA

[Kenny202]

No offence to anyone and I don't know the full story but have seen this scenario repeated over and over particularly in villages. And the debtor crying poor and didn't understand doesn't wash with me. They know how these loans work far better than any of us particularly at his age. All they seem to care about is getting their hands on the cash without thinking things through or the consequences. First question is why did he miss 4 payments and not contact the agent? or am I reading that wrong?

 

These people often just never take responsibility for their own actions. What I have seen happen is the debtor misses a payment (which the loan shark is expecting). I have heard villagers across the road from me all laughing saying the person who loaned them the money was stupid....they hadn't paid and thought the loan agent had forgotten about it. Loan agent waits usually around 6 months of missed payments where the principal and compound interest is now out of reach. I saw this happen first hand row of small farms owned by people next door to each other. The loan agent was also a farm wholesale agent bought the local casava and sold onto the big factories. Like I said wait 6 months come in a take all the properties.

 

I heard one of the owners complaining they had been scammed but they themselves thought they were scamming the loan agent lol, a very smart Chinese woman. In her defense she said that she wouldn't have minded if they had contacted her and made some arrangement. One man said the interest was so high he had no chance of repaying and she said never mind the interest you haven't paid not a baht of the principal! Asked him if he had any money left of the money he borrowed....no all gone. Not his fault he had to pay for his brothers funeral 200k! Was an absolute circus and while these people are uneducated and maybe in some ways easy pray I am sure at their age they knew full well what percentage interest they would have to pay and possibly had no intention of ever paying it back. I have no sympathy for people who have less than honest intentions themselves and are victims of their own greed.   

[Peterw42]

These loan shark things are not loans, its more like rental of some money. the payments are not servicing the debt. You agree to X amount of monthly payments to rent the money for X amount of months. At the end, presuming you made all the payments, you either repay the money, or re-rent the money. There is no duration of the loan as such.

The closest banking equivalent would be an interest only loan

[damascase]

3 hours ago, BritManToo said:

Pay the money owing on the condition the property is immediately transferred to your wife, but he can live there for the rest of his life. Else walk away, it's not your business.

 

That's what I did for my MiL playing the same game.

Any of your wife's brothers/sisters don't need to know.

Cost me 100kbht, my wife gained a property worth 500kbht.

Not a bad idea at all. Worth consideration!