Who Can (and How To) Get A Loan For Car/house Etc?

[phormio]

My wife is Thai and we're moving to Thailand(from the US) at the end of 2004 and I although we have savings we want to borrow money to purchase a car and a house; however we are in no hurry - the impending FTAs with Japan and the USA have the potential to cut the excruciating automobile tariffs and taxes, and the real estate market is looking like a burst-ready bubble .

We estimate that between the two of us, being modestly optimistic, we'll be able to make approximately 140,000 baht per month(she'll be pulling 100K as a marketing manager/consultant and i'll be pulling around 40k as a teacher).

Can we borrow money to buy a car and a house based on our salaries/my work permit ? My wife hasn't lived in Thailand for over 12 years.

Since it is such a male-oriented society, is it just the husbands' income that counts?

In the US, if you borrow money from a bank to buy a house, and then you don't make the payments(if you lose your job, or run into unexpected expenses) the bank will foreclose - take possession of the house and sell it to cover the cost of the loan; the bank rarely if ever sues the person who defaulted on the mortgage. Likewise, i f someone borrowns money to buy a car in the US, and then does not make the payments on the car loans, the bank repossesses the car and sells it to cover as much as the loan amount as possible.

But how does this work in Thailand?

Thanks for your advice/suggestions.

[Sumitr Man]

impending FTAs with Japan and the USA have the potential to cut the excruciating automobile tariffs and taxes,

Thailand's new energy savings tax laws will counter these on any cars with engines over a certain size. Although, granted, so long as you are not buying a 4x4, the price next year should be lower than this.

the real estate market is looking like a burst-ready bubble .

Don't look at the Thai housing market the same way you do the west. Even if there is a bubble in the market, it'll likely not have much of an affect on net sale prices [unless, that is, you buy repo houses directly from the bank].

Since it is such a male-oriented society, is it just the husbands' income that counts?

Not by any means. The bank will be very happy to take into account your wife's salary.

Can we borrow money to buy a car and a house based on our salaries/my work permit ? My wife hasn't lived in Thailand for over 12 years.

This will be the problem. Unless your wife has maintained a bank account here, she'll not have a credit history. OTH, your WP is only valid for a year, so strictly speaking you'll only be allowed to borrow for a year. However, if either you or your wife have someone willing to stand guarantee, you should be able to borrow.

Foreclosure laws in Thailand are a minefiled. Banks will take this as an absolute last resort. More common is just to say that you are in default of your loan, and sell the house. Under such circumstances, you are also liable for any short fall amount. Note: this is not the same as foreclosure, where the asset is taken in exchange of the remaining debt outstanding.

Finally, if you are looking to borrow in Thailand, as a Thai-farang couple, look to be putting 20-25% down as down-payment, failing which it is unlikely you'll be able to borrow - no 100% mortgages here!

[phormio]

the real estate market is looking like a burst-ready bubble .

Don't look at the Thai housing market the same way you do the west. Even if there is a bubble in the market, it'll likely not have much of an affect on net sale prices [unless, that is, you buy repo houses directly from the bank].

What you're saying is the prices go one way - up. So what goes up doesn't always come down (au contrare vis-a-vis an old song).

Any suggestions on how to by a repo directly from the bank ?

Do you have to have a 'personal relationship' with high level bank executives to do this?(sounds like big "Tea-Money" to me)

Can we borrow money to buy a car and a house based on our salaries/my work permit ? My wife hasn't lived in Thailand for over 12 years.

...However, if either you or your wife have someone willing to stand guarantee, you should be able to borrow.

As in what-we-call-in-the-states a co-signer. Does the cosigner's property have to have value greater than the outstanding value of the loan that is being cosigned for? Is a good credit rating for the co-signer acceptable? Can a co-signer be a US citizen living in the US or must it be a Thai resident / Citizen?

Foreclosure laws in Thailand are a minefiled.  Banks will take this as an absolute last resort.  More common is just to say that you are in default of your loan, and sell the house. Under such circumstances, you are also liable for any short fall amount.  Note: this is not the same as foreclosure, where the asset is taken in exchange of the remaining debt outstanding.

!

Do you mean to say that the lending agency or bank will take legal action against you to get the difference between your equity and the loan amount after they have repossessed your house ? (Can a farang get a job as a repossessor in the LoS )

Finally, if you are looking to borrow in Thailand, as a Thai-farang couple, look to be putting 20-25% down as down-payment, failing which it is unlikely you'll be able to borrow - no 100% mortgages here!

So if I wanted to buy a place to live in(for $150,000) and transferred in $30,000 to make a down payment, then 10 years later sold the place for $200,000 (after making payments from my legal earnings in Thailand) would I be able to legally transfer that $200,000 out of Thailand?

Do they have debtors prison in Thailand - can they put you in jail for borrowing money and then defaulting on the loan ?

Of course they may have 'other ways' of dealing with defaulters?

[Sumitr Man]

What you're saying is the prices go one way - up. So what goes up doesn't always come down (au contrare vis-a-vis an old song).

Actually, not what I would say. What I would say is that something only has a value if someone else is willing to buy it off you for the price you're willing to sell it. Herein lies the problem. A Thai would rather leave the property empty than sell for a price you deemed market price if that price was below the price they deemed to be market value.

Any suggestions on how to by a repo directly from the bank ?

Assuming your wife (or you for that matter) can read Thai, check out any of the major banks' web-sites.

Do you have to have a 'personal relationship' with high level bank executives to do this?(sounds like big "Tea-Money" to me)

see above

Does the cosigner's property have to have value greater than the outstanding value of the loan that is being cosigned for?

No

Is a good credit rating for the co-signer acceptable?

Essential.

Can a co-signer be a US citizen living in the US or must it be a Thai resident / Citizen?

Strictly speaking must be a Thai-based citizen; however, in certain circumstances may be a foreign company with good history in Thailand.

Do you mean to say that the lending agency or bank will take legal action against you to get the difference between your equity and the loan amount after they have repossessed your house ? (Can a farang get a job as a repossessor in the LoS   )

Sorry - I assume by this you are saying you have positive equity in the property? I assumed, originally, you meant negative equity. But, why would you want foreclosure to apply to something in which you have positive equity? Foreclosure is a straight swap of debt for asset - without equit (a concept Thai law doesn't recognise).

So if I wanted to buy a place to live in(for $150,000) and transferred in $30,000 to make a down payment, then 10 years later sold the place for $200,000 (after making payments from my legal earnings in Thailand) would I be able to legally transfer that $200,000 out of Thailand?

It's impossible to say what currency regulations Thailand will have in 10 yrs time. However, based on the assumptions (1) that we use today's law; and (2) you have a full paper trail evidencing this inflow of fx, I cannot see why you shouldn't be able to do as you say.

[phormio]

What you're saying is the prices go one way - up. So what goes up doesn't always come down (au contrare vis-a-vis an old song).

Actually, not what I would say.  What I would say is that something only has a value if someone else is willing to buy it off you for the price you're willing to sell it.  Herein lies the problem.  A Thai would rather leave the property empty than sell for a price you deemed market price if that price was below the price they deemed to be market value.

The point is only in very extreme circumstances, meaning very rarely, do Thais sell property at a price lower than what they paid for it. So prices are sticky up, more say than in other places. In the US, a home is the primary mechanism for most families to save - the (market)value increases and keeps up the with inflation; just curious - does the same hold true for Thailand - home's/land are how they save for the future ?

Sometimes, due to economic conditions, interest rates, or the fact that there is a housing bubble, demand dries up and prices stabilize or are forced down; from what I've heard prices did not fall very much or at all in the late 90s as a result of the economic crisis in Thailand. Usually those desperate for liquidity are the first to sell at a loss. The Thai are just patient or the system does not force debtors to come clean- the banks don't repossess the properties of those who no longer make payment.

Do you mean to say that the lending agency or bank will take legal action against you to get the difference between your equity and the loan amount after they have repossessed your house ? (Can a farang get a job as a repossessor in the LoS   )

Sorry - I assume by this you are saying you have positive equity in the property?  I assumed, originally, you meant negative equity. But, why would you want foreclosure to apply to something in which you have positive equity?  Foreclosure is a straight swap of debt for asset - without equit (a concept Thai law doesn't recognise).

Actually by equity I mean the amount of principal that I have paid off on the loan. If you put a down payment and then take out a mortgage and then make monthly payments the amount of principal paid off is small at first, since most of the monthly payment is considered to go towards interest. Standard mortgage payment stuff. If you stop making payments on the mortgage, you still have some principal paid up which is what I call the equity in the house. If you sell the house because you can't make payments, you may have enough to complete paying off the original amount on the loan, if the mortgage/loan agreement allows this(I don't know what these contracts are like in Thailand)

Loan Amount = Total Principal(TP)

monthly payment = monthly principal(MP) + monthly interest(MI)

Outstanding Principal = TP - ( Sum of MPs)

If you stop making payments then since you have made a 25% downpayment on the house, if you are forced to sell it to repay the loan to the bank you can usually repay the full loan amount unless the value of the house has fallen substantially; in this latter case, will the bank sue you to recover the full value of your loan?

[Sumitr Man]

Actually by equity I mean the amount of principal that I have paid off on the loan. If you put a down payment and then take out a mortgage and then make monthly payments the amount of principal paid off is small at first, since most of the monthly payment is considered to go towards interest. Standard mortgage payment stuff. If you stop making payments on the mortgage, you still have some principal paid up which is what I call the equity in the house. If you sell the house because you can't make payments, you may have enough to complete paying off the original amount on the loan, if the mortgage/loan agreement allows this(I don't know what these contracts are like in Thailand)

Loan Amount = Total Principal(TP)

monthly payment = monthly principal(MP) + monthly interest(MI)

Outstanding Principal = TP - ( Sum of MPs)

If you stop making payments then since you have made a 25% downpayment on the house, if you are forced to sell it to repay the loan to the bank you can usually repay the full loan amount unless the value of the house has fallen substantially; in this latter case, will the bank sue you to recover the full value of your loan?

I see what you're saying. This is not foreclosure under Thai law. Foreclosure under Thai law is a stright debt-to-asset swap (and due to the enforcement process, is very unpopular among creditors), with any remaining debt exponged (sp). What you're talking of is the more common debt repayment via sale of assets. In such circumstances, positive equity following sale by auction (after repayment of existing debts) will be returned to you.

[Sumitr Man]

Sometimes, due to economic conditions, interest rates, or the fact that there is a housing bubble, demand dries up and prices stabilize or are forced down; from what I've heard prices did not fall very much or at all in the late 90s as a result of the economic crisis in Thailand. Usually those desperate for liquidity are the first to sell at a loss. The Thai are just patient or the system does not force debtors to come clean- the banks don't repossess the properties of those who no longer make payment.

I've never fully understood the concept of repayment [or lack thereof] in Thailand. I used to work for a bank in the UK where an NPL ratio of 0.5% would likely have seen the bank in serious trouble. Yet here, I often see banks quoting NPL rates of 5% - there's just no way a UK bank could survive with that sort of NPL exposure. Another case of TiT!

[bkk_mike]

from what I've heard prices did not fall very much or at all in the late 90s as a result of the economic crisis in Thailand. Usually those desperate for liquidity are the first to sell at a loss. The Thai are just patient or the system does not force debtors to come clean- the banks don't repossess the properties of those who no longer make payment.

I've never fully understood the concept of repayment [or lack thereof] in Thailand. I used to work for a bank in the UK where an NPL ratio of 0.5% would likely have seen the bank in serious trouble. Yet here, I often see banks quoting NPL rates of 5% - there's just no way a UK bank could survive with that sort of NPL exposure. Another case of TiT!

The reason why house prices never drop in Thailand is because banks have a hard time foreclosing on a mortgage (which is why you don't get 100% mortgages etc.)

Part of the problem is that Thai bankruptcy courts are a joke. The best know example is Thai Petrochemical Industry which basically went bankrupt in the crash in 1997, yet the 140 creditor banks have been unable to foreclose on it's assets (and the biggest creditor is Bangkok Bank, so it's not that they don't have their own connections). In fact, the company is still trading...

Just look up "TPI bankruptcy" in Google news - and the saga is ongoing - and this is 7 years later...

Back to house prices...

Nobody willingly sells their home for less than they paid for it anywhere. Even in the UK in the early 90s, when house prices did fall, most people simply carried on paying their mortgage until they picked up again, and as Thailand doesn't let you borrow 90-95% anyway, the people that they're lending to aren't stretched quite as much as in most countries... - and even if they do suffer a reversal (like losing their job), the bankruptcy process takes so long here that there are still people living in houses that they haven't paid a penny in mortgage payments since 1997...

(and until the bank can foreclose - there's no asset sale, so no drop in prices).

There was a drop in price for new houses post 1997 (especially if you were taking the money from abroad, because of the far bigger drop in the exchange rate).

Regardless of all this - demographics are in favour of prices in Thailand going up rather than down, at least in the long term... - population is rising, and GDP is rising faster than the population, so the average Thai has more money than they used to have...