Financing For Foreigners In Thailand

[SiamLegal]

Financing for Foreigners in Thailand

Financing

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When we buy a property back home, one of the fist things we would think of is financing. Even for those who have sufficient funding and liquidity for an acquisition, financing is often seen as a means of leveraging our investments. For buyers with less access to funding, financing is an indispensable vehicle they use to own that dream home. In this instance, Thailand is the same as any other country. Most of the financial institutions in Thailand provide loans for real estate purchases to local Thais and Thai companies based on similar criteria we are used to in our home country. However, the similarities do end there for most foreigners buying property in Thailand.

Foreigners generally cannot mortgage properties in Thailand. In fact, mortgage lending by local banks to foreigners was virtually unheard of in Thailand. Nonetheless, in recent years we have seen a slight shift in policies to allow foreigners limited access to financing. This was instigated, in part, by the Thai government's eagerness to promote tourism and to encourage economic growth in Thailand. This was introduced during the high growth period of the past five years leading to Thailand's current climate which can now be best described as moribund. Despite this, the momentum gained from the past few years has meant that some Thai banks do offer financing services to foreigners but impose rather strict terms and conditions on their availability. The most important condition is that the property has to be held in the foreigner's own name and the property has to be registered as a condominium under the Condominium Act since foreigners are restricted to purchasing only these types of properties in Thailand.

Local Lending in Thailand

Terms of offer for loans in Thailand are dependent on the policies of the Bank of Thailand for each fiscal term. This is also dependent largely on each bank's own business strategies which also vary year by year. Banks in Thailand normally provide personal loans to individuals and this includes credit card facilities, business loans, personal loans for education or medical treatment as well as personal loans for general use such as the purchase of a condominium, renovations, car purchases and so on. These facilities are, subject to each bank's individual policy, available to foreigners who have lived and worked in Thailand for a number of years.

In order to obtain these personal loans for the purchase of a condominium, certain conditions must be met. First of all, it is important to note that these loans are generally granted on the fair market value of the property and this is usually based on the bank's own valuation process. The other important criterion is the qualification of the foreigner. These are set out below in the following:

• A letter of employment indicating their years of service in Thailand and their annual salary. Pay slips will usually be attached to this as well. The banks may also request for the employer's company documents or a marriage certificate if applicable. The banks would also conduct credit checks on the foreigner as they would with any local applicant. The applicant's age combined with the loan period must not exceed 60 years. Applicants must have a stable and secure job. Applicants must have a fixed income three times higher than each installment repayment.
  
• The aggregate amortization of loan must exceed 7 years (for some banks).
  

The applicant may also be required to submit the following documents to the bank upon application.

• Copies of passport including visa page, ID card or government official ID card, house registration certificate, and marriage certificate of the applicant and spouse (if applicable). Confirmation of income or salary, and copies of bank statements for the previous six months.
  
• Copies of land or unit title deeds, sale and purchase contracts and construction specifications if applicable.
  

The interest rates for these types of loan are typically based on the MLR or on a fixed interest rate depending on the bank offer at the time. It is also helpful to note that because these loans are offered locally, the interest rates are usually a bit more competitive and it does pay to shop around first.

International Home Loan Schemes for Thailand

Around the middle of 2005, Thailand saw the emergence of a new financing service offered by Bangkok Bank's Singapore branch. At this time we saw Bangkok Bank starting to offer offshore financing for foreigners wishing to purchase real estate in Thailand. Up to 70% of the property's value was made available to foreigners who did not qualify for a local loan. This gave many foreigners access to finance for their dream homes even if they did not reside in Thailand. Up until this time, there were only a handful of private offshore firms offering lines of credit of this kind and often at rather stringent and unattractive terms.

Bangkok Bank in Singapore still offers such loans to foreigners and the demand for this is increasing. They are able to tender loans in several currencies including US and Singapore Dollars. Currently, the interest rate for USD loan consists of the prime plus 0.5% which in total stands at 8.75%. A processing fee will also be incurred upon application. Bangkok Bank does insist on meeting the applicants in person and this means you would usually have to travel to Singapore to apply for this.

Bangkok Bank was the first bank in Singapore to offer such financing services. However, this year we saw the introduction of United Overseas Bank (UOB) in Singapore jumping on the band wagon and offering similar lending services to foreigners wishing to purchase real estate in Thailand. It is a relatively new scheme for UOB and it was introduced largely as an alternative to Bangkok Bank's hold on this lucrative market. It is a good thing that we are starting to see some competition in this area and in the future this will hopefully create an environment that would improve the consumer's position with various banks trying to outdo each other with more competitive rates. At the moment, the terms for a UOB international loan is still very similar to Bangkok Bank with their interest rate currently also at 8.75%. However, it appears their processing fee may be slightly higher but offers the advantage of applying for the loan locally in Thailand without having to set foot in Singapore. UOB's entrance into this niche market is a welcoming sign to the area of financing to foreigners in Thailand.

Criteria for a Mortgage

Mortgages are governed under section 702 of the Thailand Civil and Commercial Code. In this section, there are certain rules which must be adhered to in order to qualify for protection under Thai law. These include the following:

1. The mortgager must have the right of ownership of the property.

2. The mortgage contract must be in writing and must be registered an authorized office; otherwise the mortgage contract is invalid.

3. The parties must register the mortgage to the authorized Officer for the following cases:

a. Land with Title Deed has to be registered at the Land Department or Bangkok Metropolis Land Office (Branch) or Provincial Land Office or Provincial Land Office (Branch) where the land being mortgaged is located.

b. Land with no Title Deed such as Nor. Sor. 3, has to be registered at the District Office where the land being mortgaged is located.

List of the Banks in Thailand

Below is a list of several banks in Thailand along with their various policies and criteria on servicing loans to foreigners.

Name

Terms and Conditions for Qualification of Loan

1.

Bangkok Bank PCL.

Bangkok Bank in Thailand itself does not provide loans for foreigners under any circumstances. Only Bangkok Bank in Singapore provides this service to foreigners.

2.

Bank of Ayudhaya PCL.

Bank of Ayudhaya does not offer loans to foreigners at this present moment.

3.

HSBC

HSBC does provide loans to foreigners under the following conditions:

• Residence Permit, 1 year work permit, letter of employment, company's documents or other pertinent documents upon request.
  

• Bank will grant loans for foreigners based on the current market value:
  

- Condominium 70% of the value and Land and House up to 80% of the value.

- An amortization period of 7 years.

4.

Kasikorn Bank

Kasikorn Bank does not offer loans to foreigners at this present moment.

5.

Siam Commercial Bank PCL. (SCB)

Provides loans for foreigners under the following conditions:

• 1 year work permit, consideration based on rate of salary, background check for the employment and credit rating.
  

• The foreigner can receive a loan for a condominium or house.
  

• A joint loan can only be obtained between blood relations.
  

• Amortization period of between 5-7 years.
  

For personal loans, SCB only grants credit cards, but not for personal business loans.

6.

Thai Military Bank PCL. (TMB)

Provides loans for foreigners (only condominiums) under the following conditions:

• 2 year work permit or 2 years residence permit, passport, letter of the employment, payment slip and other supporting documents requested.
  

• If the foreigner has some added security finance, this will be an added appendage for the banks to consider.
  

• If the loan is for landed property, a foreigner will only be able to obtain a loan if they apply jointly with a Thai spouse.
  

7.

UOB Public Company Limited

UOB in Thailand provides loans for foreigners under the following conditions:

• A loan for landed property can be obtained by a foreigner if it is applied jointly with a Thai spouse.
  

UOB has launched the new International Home Loan Scheme for Thailand to allow foreigners access to financing when they wish to buy condominiums in Thailand. This is a joint financing program between UOB in Thailand and UOB in Singapore. Loans will be obtained in UOB in Singapore and secured by SBLC which will then be issued by UOB in Thailand which will in turn register the mortgage locally.

UOB in Thailand suggests that the entire application procedure can be done within Thailand without the applicant going to Singapore.

8.

Tisco Bank

Provides loans for foreigners for condominium under the following conditions:

• 1 years work permit.
  

• Tisco will grant loans for foreigners based on the market value of the property: offers lending for condominiums for up to 70% of its value.
  

• Foreigners can borrow a maximum of 5 million Baht and not less than 700,000 Baht.
  

• Amortization rate of 10 years.
  

9.

Standard Charter Bank (Thai) Public Company Limited

Standard Chartered does not offer loans to foreigners at this present moment.

The information in this table is deemed to be accurate at the date of first publication of this article. We do not accept liability for any loss or damage claimed to be caused by the information provided in this table.

It would appear then that financing is gradually becoming more accessible to foreigners in recent years. It remains true that financing for foreigners is no still easy task and is highly dependent on your individual needs and circumstances. Financing terms are still not what we are used to back home and it is certainly not for everyone. Before applying for either a local loan in Thailand or an international off-shore loan from either Bangkok Bank or UOB it is wise to assess the markets first and consult with a reputable financial adviser or lawyer.

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[Irene]

Thank you for sharing with us your research, siamlegal, this is good stuff. I always wonder of property financing for expat.

[lazeeboy]

Thank you for sharing with us your research, siamlegal, this is good stuff. I always wonder of property financing for expat.

yes in formative post thanks

[fletchsmile]

Looks like could be informative stuff. Also saw your first post where people had different views on your style, aims and objectives. Tho' didn't comment and was just waiting to see how things develop.

One piece of constructive advice:

Your original posts, as well as replies tend to be very wordy. There's some good stuff in no doubt but I tend to loose interest part way thru. I appreciate you're used to legal style writing, but you might want to be shorter and more to the point on a blog or forum. Will get back to your post now and see if I can finish it

[Khun Jean]

Don't get your hopes up to high.

Criteria for a Mortgage

Mortgages are governed under section 702 of the Thailand Civil and Commercial Code. In this section, there are certain rules which must be adhered to in order to qualify for protection under Thai law. These include the following:

1. The mortgager must have the right of ownership of the property.

That leaves condominiums, nothing else.

In my opinion a house on leased land is not real ownership.

Edited September 23, 2007 by Khun Jean

[BL4u]

Don't get your hopes up to high.

Criteria for a Mortgage

Mortgages are governed under section 702 of the Thailand Civil and Commercial Code. In this section, there are certain rules which must be adhered to in order to qualify for protection under Thai law. These include the following:

1. The mortgager must have the right of ownership of the property.

That leaves condominiums, nothing else.

In my opinion a house on leased land is not real ownership.

You could specify it more; only if the foreign as a residents is working in Thailand and if the foreigner has a work permit and a long term contract (even for them generally Thai banks wont give financing) could be eligible to get a mortgage ONLY for a condominium. Non-residents who do not work in Thailand are ineligible. Even if they were eligible they still must transfer the money from overseas for the condominium to be registered in their name, therefore making this not a viable option.

For the rest foreigners cannot own land and cannot get financing/ mortgage to buy real estate in Thailand. For a house, as they can own this freehold? NO, of course not, if your lease or usufruct ends the house will revert back to the Thai land owner. You then only can remove your house. No bank will finance this.

It is a very long and useless story by siam legal for something very simple, foreigners cannot get financing for real estate.

I would again describe this as sales talk by siam legal. Foreigners with the idea of financing start looking for property, fall in love with a property, bind themselves emotionally and sometimes contractually, only to find that they cannot get financing.

Edited September 23, 2007 by BL4u

[fletchsmile]

That leaves condominiums, nothing else.

In my opinion a house on leased land is not real ownership.

Understand the point you are making, but you still own the house even if not the land. UK has 999 year leases which for me would be as good as ownership. So somewhere in between there's a cut-off. If the lease period will exceed your relaistic lifetime and that of anyone you'd like to leave the property to, it's as good as ownership.

It is a very long and useless story by siam legal for something very simple, foreigners cannot get financing for real estate.

I would again describe this as sales talk by siam legal. Foreigners with the idea of financing start looking for property, fall in love with a property, bind themselves emotionally and sometimes contractually, only to find that they cannot get financing.

Land in your own name no. Property yes. The reason you can't get direct financing from land is because you can't directly own land.

The ideal may be direct financing in Thailand from a Thai bank in your own name, for many people, and that's very difficult as you say.

Foreigners can get financing, just it's not always straight forward. We can get financing directly from overseas instead eg UOB and BKK Bank Singapore. Or remortgage an existing overseas property in your name. We can get financing indirectly thru spouses - if you're comfortable with the idea of marriage as a partnership. You can get indirectly thru company routes. Also indirectly and illegally thru nominees. Wouldn't do the last two myself tho'.

Edited September 24, 2007 by fletchthai68

[thaigene2]

Agree this is useful - so thanks for that compendium - but I also agree with BL4u

it seems to me at least that things are returning to where they were a little over a year ago. In short, the banks will loan, but there are (or were back then) quite restrictive conditions other than those specified here.

The main point - which I think refers to BL4u's post, is that for a condo, many of the banks I spoke to back then would only supply the loan once you had a registered title in your name. Remember, in order to register you need to show that 100% of the cash came from overseas - this is proved by foreign transaction certificatesissed upon your receiving Thai bank account. So like he says - it's a chicken and egg thing.

But maybe it's getting better?

The other hurdle of course which to me makes it much less attractive even if they are lending now is the unstable visa situation. then again, you'd think the banks would be worried about that too wouldn't they? I would it I were them..

So let's see. Would be good to learn of experiences of those with work permits alone trying to get loans to finance condo purchase

[Khun Jean]

That leaves condominiums, nothing else.

In my opinion a house on leased land is not real ownership.

Understand the point you are making, but you still own the house even if not the land. UK has 999 year leases which for me would be as good as ownership. So somewhere in between there's a cut-off. If the lease period will exceed your relaistic lifetime and that of anyone you'd like to leave the property to, it's as good as ownership.

Unfortunately 30 years is all you can be 100% sure of in Thailand. And that is in most case way too short. I would not want to have the worries when i am in my early seventies. I can not leave it to my children. I think it is just money thrown away.

In my case i have a Thai wife and 2 children. Like the chinese i will wait one generation before commiting serious money on property in this country.

After that, i can at least be sure my children and hopefully the next generations too, have a little bit of a headstart.

[fletchsmile]

That leaves condominiums, nothing else.

In my opinion a house on leased land is not real ownership.

Understand the point you are making, but you still own the house even if not the land. UK has 999 year leases which for me would be as good as ownership. So somewhere in between there's a cut-off. If the lease period will exceed your relaistic lifetime and that of anyone you'd like to leave the property to, it's as good as ownership.

Unfortunately 30 years is all you can be 100% sure of in Thailand. And that is in most case way too short. I would not want to have the worries when i am in my early seventies. I can not leave it to my children. I think it is just money thrown away.

In my case i have a Thai wife and 2 children. Like the chinese i will wait one generation before commiting serious money on property in this country.

After that, i can at least be sure my children and hopefully the next generations too, have a little bit of a headstart.

Would agree with you in your case not wanting 30 year lease. I wouldn't want either for me in my case. But varies for different people. Maybe suit someone in their 50's, 60's; particularly if single. Each to their own

[jrbkk64]

It seems some Thai banks have changed policies recently. I am told some Thai banks can only arrange mortgages for foreigners with a resident permit. Just a work permit is no longer sufficient.

Anybody out there who knows?

[Theyreallrubbish]

I spoke to HSBC Premier just a couple of weeks ago and they told me that they would issue a mortgage through HSBC Thailand on the following terms:

Proof of earnings - doesn't need to be Thai based so no requirement for work permit, residency etc.

Only up to 70% of value

Maximum 15 year term

The kicker is a huge arrangement fee of around $2000!!

[Lazy Sod]

I spoke to HSBC Premier just a couple of weeks ago and they told me that they would issue a mortgage through HSBC Thailand on the following terms:

Proof of earnings - doesn't need to be Thai based so no requirement for work permit, residency etc.

Only up to 70% of value

Maximum 15 year term

The kicker is a huge arrangement fee of around $2000!!

I can't get a straight answer from HSBC Premier on the maximum loan term. A couple of years ago they told me 7 year max for a foreigner, then with some pushing they said that they may extend it to 10 years in very special cases, now they are telling you 15 years. They gave me a standard HSBC Loan summary sheet at the time which stated, "Maximum loan period for foreigners is 7 Years". I called HSBC BKK a couple of months ago and was told it was now 7 years with no exceptions. Wish they'd make their minds up on this. A couple of months ago I was considering a buy-to-let condo, but with a loan term of only 7 years it means the mortage payments far exceed the rental income, but at 15 years it starts to get viable.

[Theyreallrubbish]

I spoke to HSBC Premier just a couple of weeks ago and they told me that they would issue a mortgage through HSBC Thailand on the following terms:

Proof of earnings - doesn't need to be Thai based so no requirement for work permit, residency etc.

Only up to 70% of value

Maximum 15 year term

The kicker is a huge arrangement fee of around $2000!!

I can't get a straight answer from HSBC Premier on the maximum loan term. A couple of years ago they told me 7 year max for a foreigner, then with some pushing they said that they may extend it to 10 years in very special cases, now they are telling you 15 years. They gave me a standard HSBC Loan summary sheet at the time which stated, "Maximum loan period for foreigners is 7 Years". I called HSBC BKK a couple of months ago and was told it was now 7 years with no exceptions. Wish they'd make their minds up on this. A couple of months ago I was considering a buy-to-let condo, but with a loan term of only 7 years it means the mortage payments far exceed the rental income, but at 15 years it starts to get viable.

I spoke to HSBC Premier in the UK who contacted HSBC in Bangkok and then called me back with that info.

I was toying with the idea of buying a condo in Chiang Mai and its cheap enough that as soon as I heard abouit the $2000 arrangement fee I decided I'd pay cash or get a personal loan outside Thailand so I didn't pursue it. Personal loans in the UK are easy to get on up to 25 year terms with no arrangement fees and pretty low interest rates. Plus they're unsecured.

[thaigene2]

Yes, it keeps changing. But it's worth a try. As someone above said, just don't get your hopes up.

Bear in mind what happened to us - prior the coup.

We had made an offer on a condo in BKK. The Bank (one of the top 3) agreed to lend to me for 15 years at 80% financing. Then, abruptly, they said no - after the bank had already done the appraisal. Naturally I refused to pay for that valuation.

They basically agreed xenophobia had crept into the market via the Bank of Thailand (and of course that came from somewhere else), and that was that.

So now the banks are back in the game, because - ya know - they're in the biz to make money, not commiserate with the establishment.

My advice is 'be careful'..I, frankly, don't trust them.