Borrowing From A Thai Bank

[mixed]

My partner is looking to buy land. Yesterday she went to our local bank for an informal chat about borrowing. When she told them the location, they said it's a tourist area and the block size would make it suitable for a resort, so therefore she would have to ask for a business loan .

Despite being asked twice, the guy wouldn't tell her the difference in interest rates.

She can put up 10 - 20% deposit and is only looking to borrow for the land, not for further development. She also has decent collateral and runs a profitable business.

Any suggestions how she should proceed?

[Mario2008]

Look at the bank's website, it should list the different interest rates and shop round a little bit. Could save a lot of money.

[mixed]

Look at the bank's website, it should list the different interest rates and shop round a little bit. Could save a lot of money.

Thanks, that's helpful. I noticed on the bank's site they have 'housing loans', I wonder if that would include land?

[dave111223]

From my experience it would be difficult to get a 80%-90% on land.

For example SCB will offer 70% on a used commercial townhouse purchase, but offer only 50% loan on land purchase.

Other banks will offer 80%-90% for a building, so i'm guessing their land lending would be somewhere 60-70% max...

(Other members with more land purchase experience may prove this incorrect though)

Edited March 4, 2010 by dave111223

[ongoing]

My thought for us Farangs living in Thailand is that if you have to borrow / lead or need to loan money for a business in Thailand, you should not be living in Thailand.

Dont spend what you havent got in thailand. Its not worth it.

[Spoonman]

My thought for us Farangs living in Thailand is that if you have to borrow / lead or need to loan money for a business in Thailand, you should not be living in Thailand.

Dont spend what you havent got in thailand. Its not worth it.

Im guessing the OP's partner (female) is Thai, why jump on the farang bashing train ??

[ongoing]

If you and your partner are borrowing money for land. I am guessing the land will be somewhere near her family. Make sure the loan from the bank is all in her name and your name is no where on the loan agreement . That way you can run like Forrest Gump back to Sweet Home Alabama when it all goes tits up ! Which it will do when her family get hold of the land and you have no say about what goes on.

[mixed]

Thanks for the useful replies. The land is not near her family and there is no plans for a business. She already has other land for collateral and earns good money.

Regarding the bank only giving 50% for land purchases, we can probably live with that, however I'm suspicious of the 'business loan' suggestion, as I guess the interest rate is higher.

I also read on the BB site that they require a sales agreement before considering the loan. It seems a bit risky to agree and put a up a deposit if one is not sure that finance is available.

[Maizefarmer]

Thanks for the useful replies. The land is not near her family and there is no plans for a business. She already has other land for collateral and earns good money.

Regarding the bank only giving 50% for land purchases, we can probably live with that, however I'm suspicious of the 'business loan' suggestion, as I guess the interest rate is higher.

I also read on the BB site that they require a sales agreement before considering the loan. It seems a bit risky to agree and put a up a deposit if one is not sure that finance is available.

Thats exactly what he's doing. The "sales agreement" with the seller should include a small print clause "subject to buyer accepting interest rate offered by mortgage lender", or, more discreetly "subject to lenders terms & conditions". Now you can call his bluff (the bank can't do business otherwise) - tell them to call when ready, in the meantime you guys are off to talk to other potential lenders.

[dave111223]

I also read on the BB site that they require a sales agreement before considering the loan. It seems a bit risky to agree and put a up a deposit if one is not sure that finance is available.

Normally the deposit placed when making the sales agreement are quite small in Thailand. Often as little as a few 1000 baht will be enough for the seller to make a contract.

If the financing fails i think you'd find it pretty hard to get the deposit back from the seller (even if the contact says "subject to buyer accepting interest rate offered by mortgage lender" etc..)

Try to put down a small deposit with the seller to get the sales agreement, only as much as you are prepared to lose if you cannot find financing.

I should also add that there are other steps which will require you to chance losing money. Bank will require you pay a survey fee (around 2500baht) for them to come and value the land. Some banks charge this up front, others charge it after they have pre-approved the loan.

Try to find a bank that offers free pre-approval, such as Krungsri, Krung Thai, or Kasikorn. Bangkok Bank charges 2500 up front, non-refundable even if they deny your application.

They will only use their valuation of the land to calculate how much they will lend you (not the sales price).

So if you want to buy the land for 5M baht.

The bank says "We'll lend you 50%"...but then they value the land at 4M baht. This means they will only lend you 2M baht.

Edited March 4, 2010 by dave111223

[Smithson]

One thing about putting down a small deposit, is that the seller can also opt out if they get a better offer.

I would talk to other banks I'm not sure if the interest rate for land purchases are the same as house? I imagine a business loan would be considerably higher than a housing loan.

Edited March 4, 2010 by Smithson