Requirements For Obtaining Loan For Land

[Smithson]

My wife is looking for a loan to buy some land. The bank's told her she needs a 25% - 30% deposit and a fairly decent histroy of savings.

We've got a successful business together, her salary is around 18k, but savings aren't that great because as we've been putting everything into the business for expansion. There's nothing more we need so savings from now on should be fairly easy.

The land she's looking at is around 1.5m, so she'd be looking to borrow about 1.1m. Considering there's a lot of income, but not a great deal of savings, do you think she could get a loan?

Also, the bank told her she needs to find the property, sign the contract and put the deposit down before being sure of a loan. They said they could only give her a percentage idea of whether she would qualify, rather than approving the laon before purchase. Is this the procedure over here?

Edited October 8, 2007 by Smithson

[Smithson]

Does anyone have info on this?

[Crossy]

We're in a similar (but not identical situation).

We already have our land (valued at 6 million). I thought it would be a piece of cake to borrow against it (2 million over 5 years) to build our retirement home. I have a good offshore income (not working in Thailand) various supporting documents, wifey is Thai but not working (I need a lot of looking after ).

WRONG!

As a foreigner, even with a solid income I can't get a mortgage without a guarantor (no work permit). My wife is not acceptable as guarantor (not working), my step son is not acceptable (not related?).

Many banks wouldn't even look at a loan against land with no building on it.

We eventually sussed it by borrowing against my step sons restaurant business with me as guarantor (don't ask, I have no idea why I can guarantee a loan but not actually get one). We owe Seksan (the son) a big favour (he's getting the house and land when we both croak, hope he doesn't have us bumped off ). This was with Siam Commercial Bank.

You may score by getting the business to obtain the loan assuming it's viable and been trading for a while.

30-40% deposit seems realistic (although HSBC said they'd lend us 90% for house construction, but then decided something else wasn't in order).

I can't comment on the 'pay a deposit first then we'll think about the loan' idea, seems pretty silly really.

Above all, it's vital to shop around (oh for mortgage brokers in Thailand), we had many near misses but there was always something that killed the deal. Persevere

Edited October 9, 2007 by Crossy

[Smithson]

We're in a similar (but not identical situation).

We already have our land (valued at 6 million). I thought it would be a piece of cake to borrow against it (2 million over 5 years) to build our retirement home. I have a good offshore income (not working in Thailand) various supporting documents, wifey is Thai but not working (I need a lot of looking after ).

WRONG!

As a foreigner, even with a solid income I can't get a mortgage without a guarantor (no work permit). My wife is not acceptable as guarantor (not working), my step son is not acceptable (not related?).

Many banks wouldn't even look at a loan against land with no building on it.

We eventually sussed it by borrowing against my step sons restaurant business with me as guarantor (don't ask, I have no idea why I can guarantee a loan but not actually get one). We owe Seksan (the son) a big favour (he's getting the house and land when we both croak, hope he doesn't have us bumped off ). This was with Siam Commercial Bank.

You may score by getting the business to obtain the loan assuming it's viable and been trading for a while.

30-40% deposit seems realistic (although HSBC said they'd lend us 90% for house construction, but then decided something else wasn't in order).

I can't comment on the 'pay a deposit first then we'll think about the loan' idea, seems pretty silly really.

Above all, it's vital to shop around (oh for mortgage brokers in Thailand), we had many near misses but there was always something that killed the deal. Persevere

I've been told getting a loan in the company name is very difficult, so we were planning to get it in the wifes name and then have the company lease the land from here. I know getting it in my name (even with a work permit) would be almost impossible.

BTW, good luck with the house, sounds great.

[gregb]

What the bank is really looking for is (surprise) some assurances that she will be able to repay the loan.

First, they want to see the downpayment in the bank already, and they'd like to see it there for a long period of time. You can however, often get around this requirement by showing the money came from sale of an asset, such as gold. Again, it depends on the bank, but what they are looking for is simply obvious: you have the money for the down payment and you didn't just borrow it from a loan shark.

Second, they want to know there is enough disposable income to meet the monthly payments. Since you've stated this is about a 1.1 million baht loan on land only (usually max term 15 years), without knowing more about the specifics we can guess that the monthly payment will be around 10-12k.

Since your wife only shows 18k/mo. in salary, this will be tough. The maximum I think the banks will be prepared to part with based on her salary is around 600k. She will require a guarantor to get more than this. You'd better plan for that up front.

My experience in applying for loans in Thailand is that one of the first pieces of information they will need to apply for the loan is the sales contract. Note, this does not mean the full down payment! What it does mean is that you put down, say 40-100k to the seller, the rest contingent upon being approved for the loan. If you fail to get the loan, you forfeit the money. The sales contract is usually for a period of 2 to 3 months, and it is entirely up to you and him what amount of money is at stake here. If you do get a loan or partial loan, you have to come up with the rest of the money to complete the deal before the sales contract expires. The bank will go with you to the land office with the check on the day of the purchase, and give it directly to the seller on the sales contract after you have given the rest of the money.

I think you can get this, but it might be tough. I'd apply at at least 3 different banks. You don't have to accept the loan if you are approved, so there is no harm in doing all in parallel except for the 2000 - 4000 baht fee. You don't say where this land is, or what its purpose is. I think you will have alot better luck if this property is less than 1 rai in an area for residential development. If you're trying to buy farmland, I think a loan is highly improbable. My opinion only...your banker will make the real decision.

Good luck.

[Smithson]

Gregb,

Thanks alot, the info is very helpful. Making the payments won't be a problem, however her finances don't look so good on paper. As a farang with a work permit can I go guarantor?

[quiksilva]

Yes you can be her guarantor (I am my wife's), she has a reasonable job so we got a mortgage to buy a house with no problem but I appreciate that not everyone is in the same position.

However, I have known friends to be creative with how they seemingly provided an income for their wife but if you do look into this understand that banks require 6 months of bank statements and (and this is the kicker) six months of salary slips.

Even assuming you can get all of these ducks lined up, you then have another real issue to face and that is the fact that bank's don't like lending on raw land. They prefer completed structures, which are easier to liquidate should they ever need to foreclose.

May I suggest that you get the income thing worked out and find decent house out there that will meet your requirements, it will be much easier for you both.

Edited October 10, 2007 by quiksilva

[Smithson]

We've got a couple of years worth of payslips, but it still sound's like there's a few hurdles to get over. What about having a high deposit, something like 50%, does this help?

I don't mind the idea of buying a house, but it's difficult to find the place we want. Besides being fussy, there needs to be extra land to build somewhere to work from. At the moment we're paying a fortune in rents, so it would be much better if this cash could be put towards loan repayments.

[Smithson]

Just a few more questions on this:

We've got several years of payslips for both of us, 15K per month for her and 40K for me. The company is in both our names, it's grown from 4 to 22 people in 21/2 years and is doing well, although profits are minimal because all the money is going for equipment and supplies as we grow. So our savings haven't been that great also.

There is nothing more to spend, except for some advertising, so our savings should increase considerably. The block we're looking at has a very run down house, basically just a slab with some brickwork. We would plan to rebuild, simply and cheaply and also build a large shed as a factory. When this is done we'd relocate and no longer be spending the 40K that we currently spend on rent.

While on paper things mightn't look that great, I'm wondering if we both went to the bank and discussed our situation would it help? She would be applying and I'd be the guarantor. We would have a large deposit, maybe 50%, so the risk for the bank would be much less.

Any ideas?

Thanks!

[quiksilva]

I think the 50% deposit will help. When we applied for our mortgage they said that they only took my wife's salary into account. But when all was said and done the monthly mortgage payments are greater than her salary, so they must look at what the guarantor earns too (after all they asked for all my pay slips and bank statements too).

The best thing to do is actually get in and speak to the bank. We found UOB to be the best for us.

[torrenova]

I went through this with a truck loan for my G/F.

A few months income, not backed up by salary slips, with her "saving" about 30-40k per month from her "salary" was way more than sufficient. We borrowed about 650k on the truck.

Now the bank (Siam in Nang Rong or Buriram, can't remember which) said that if we wanted to get a house on mortgage (not build on land), she'd have to pay for the truck ofr at least 6 months, thus establishing a creidt history with them and then they would look at it.

Their websites say something of the order of 250-300% of the mortgage payment must be salary. They do not say whether this is gross or net.

So we are working towards this:

We will get her on an official salary with tax receipts for perhaps 3 to 6 months beforehand.

We will work on net salary at 300%

We will add onto the net salary the truck payment (16k)

We will not argue the offset rent deduction - too complicated to explain or too complicated for them to understand is more to the point

A 3m house at 85% mortgage (the usual maximum) at 7.5% APR over 20 years (repayment method) works out at a shade over 20k per month. Thus, at that purchase price, we will set up the following:

Price - 3,000,000

Deposit (15%) - 450,000

Loan (85%) - 2,550,000

Interest - 7.5% APR

Term - 20 years

Repayment - 20,542.63 per month

So salary will be (3*20,000)+16,000 = 76,000 net

Round that up a bit to say 80k

Gross that salary up (have to get accurate details here) - 90,000

My very rough and ready calculations on that salary of 90k per month show about 7.5k tax per month plus her social contrubution (not sure how much).

Do this for 6 months before putting in the application and you're set. By that time, her "salary" will have been paid in for about 18 months, she'll have had the car loan for about 12 months, she'll apply for a credit card from Siam after another 3 or 4 months and we'll be prepared to go higher than 15% deposit (perhaps to 25%).

As for not knowing before making an application and making deposits may I suggest you get out of the cities and into the boonies. Out there, people from the bank will come to your place and go through all kinds of things and you CAN get the nod before you start anything. We did with the truck on which we borrowed 650k with merely a few entries in a bank book !