Spreaders of Conspiracy Theories: Unmasking the Motivations Behind the Lies

[dave111223]

I have fairly limited experience with mortgages in Thailand or in the West to please excuse my ignorance, but i'm having trouble understanding how Thai mortgage payments work.

I (well Thai spouse) got approved for a Mortgage of 2,499,000 THB for 20 years from Bangkok Bank, at rates of:

Year 1-2: MLR-1.75% (about 4.125%)

Remainder: MLR-0.5% (about 5.375%)

Yet the monthly payment is 19,400THB. Which when plugging in the numbers into this mortgage calculator on the Thanachartk website: http://www.thanachartbank.co.th/cds/thanac...n_home_cal2.asp

Works out to be at a rate of about 7.017%

When asked what's up with the rate mismatch the loan officer said that this is "extra amount" paid would go a towards the principle and loan term would be shorter...

But when asked "so if i pay 19,400 per month (if MLR were to stay the same) how long would it take to pay off the loan?" They were not able to answer this question...?

I'm confused, if you get a loan at a certain rate for a certain time period, how can the payment be calculated based on a different rate and different time period?

[enerzne]

thats how i understand it:

with 19'400 baht per month you pay around 7% interest and the loan back in 20 years( MLR stay same).

look at this one:

http://www.livesmart.co.th/th/mlr.asp after google translate . i saw the MLR is 7.25% for Bangkok Bank.

as to help the people in the beginning. the bank let them pay less in the first years. think investment has to start off an then should make better and more money later.

the problem is that you do not know where the MLR is going.

MLR goes up: it could be a lot higher month rate. to be finished in 20 years. or same amount and longer time to pay back.

MLR goes down: Less per month or finished earlier.

that may also be why the banker not want to tell you when this loan is payed back. probably afraid you take this date as set. they do here not like questions with an 'if' inside. yours: (if MLR were to stay the same). as this 'if' does not exist in a bankers mind, as the MLR is moving up and down for sure.

hope it helps a bit

[aurelius]

The understanding outlined above is correct.

The concept in Thailand is different to the west. We usually think of a mortgage being for a fixed term, with varying payments according to interest rates going up or down. In Thailand they try to fix the payments and as a result the term varies (but cannot go for longer than the term specified in the loan contract). This has its roots in the lack of consumer understanding and relatively low incomes - many borrowers want to know exactly how much each month they will pay and budget a set amount - they don't have enough surplus cash to be able to support the idea that next month the payment might increase by xx bt.

By effectively paying over the amount that would be required based solely on the quoted interest rate, the customer pre-pays principal (which benefits the customer and disadvantages the bank in terms of interest revenue); if interest rates rise to a level higher than the 7.xx% given in the example above, then the customer will continue paying the same amount, UNTIL it reaches a point where the loan cannot be repaid within the contracted term, at which time the repayment would be adjusted up. This model minimises changes to the repayment amount to customers.

Some institutions do not charge this way (GHB when I last checked the do it the normal western way), which financial disadvantages the customer in terms of total interest paid, but is attractive to some because the initial repayments may be lower. Most people have very little understanding of how to compare mortgage options and take a very short term view on the repayment.

Calculating the precise repayment date on the OP question is not possible becuase it depends on the interest rate between now and then; but if you make an assumption on that you would expect to see a term of maybe 15-16-17 years instead of 20.

[dave111223]

Thanks for the replies, i guess i was just always under the assumption that banks want you to pay as much interest as possible (so would not try to push you to repay the principle early). Which is kind of why when seeing this setup i was a bit skeptical.

Just wanted to make sure this extra payment wouldn't disappear into some mysterious Thai mortgage fee calculation...

I think i'll be getting the loan from Krung Thai instead of Bangkok Bank (mention above). As they have offered more money, and i was a bit shocked to find out that Bangkok Bank charges 20 years worth of insurance (building and life to cover the loan) upfront, which works out to paying 100,000 in insurance right off the bat.

Whereas Krung Thai only charges the insurance every 3 years, so you don't get hit with a massive bill on signing (only about 10,000 on signing).

Krung Thai also offers a lower monthly payment at around the MLR, and I figure if i want to pay off the loan more quickly i will do at my own choice, opposed to being force to by the Bangkok Bank package.

[ding]

Does MLR stand for Mortgage Loan Rate in Thailand?

In America we usually use 30 year fixed loans. the interest rate is fixed, the term is 30 years. If the interest rate isn't fixed it's called a variable rate. When inflation hits the USA it will be a firesale because people haven't got rid of their variable rate loans.

Does Thailand have fixed interest rate/fixed term loans?

[ianguygil]

Minimum Lending Rate

[clinique]

Out of interest why not try Bank Of Ayuhdha (Krung Si bank) - at the moment they are offering loans for property purchase with Fixed rate of 4.75%..

this is their special deal, not sure how long it will last ... check at any Branch.

[dave111223]

Out of interest why not try Bank Of Ayuhdha (Krung Si bank) - at the moment they are offering loans for property purchase with Fixed rate of 4.75%..

this is their special deal, not sure how long it will last ... check at any Branch.

We did but they would only give us an "SME" loan seeing as the townhouse is for commercial use. These loans have a max term of 10 years, and have a higher interest rate.

[fletchsmile]

Have to say it sounds garbage to me and is certainly not standard practice across all Thai banks as implied above. If you ask for a 20 year term, you should get a 20 year term. Sounds more like the bank officer you talked to didn't know how it works.

We have a 3 year fix, which would then revert to variable for the remainder of the term. When I calculated the amounts for myself the numbers tied in exactly for 1) term of loan requested 2) monthly payments

The assumption used is that MLR after the fixed rate expires is as per the start of the loan. It practice once the MLR is known at the start of year 4, when the fixed rate expires, the monthly payments would be adjusted. This pretty much follows many western practices. (In US it is more common to take out a fixed rate for term of the loan, hence fixing the payments.)

BTW One or two banks now offer offset mortgages, where balances in your savings account can be offset vs your mortgage balance. Can be very useful with savings rates around 1% and mortgages around 6%.

[Benjie]

Actually it does seem like fairly standard practice to pay a fixed amount per month with the duration the variable.

[clinique]

Out of interest why not try Bank Of Ayuhdha (Krung Si bank) - at the moment they are offering loans for property purchase with Fixed rate of 4.75%..

this is their special deal, not sure how long it will last ... check at any Branch.

We did but they would only give us an "SME" loan seeing as the townhouse is for commercial use. These loans have a max term of 10 years, and have a higher interest rate.

sorry but you did not mention in your original post that it was a commercial loan;;

these are always at MLR + 2or more % points..

[dave111223]

sorry but you did not mention in your original post that it was a commercial loan;;

these are always at MLR + 2or more % points..

Bangkok Bank and Krung Thai would allow us to get a regular housing loan for the commercial building.

Whereas Krung Si would only give the commercial loan for this kind of building.

So i guess if you're saying "commercial loans are always MRL+" then i guess this could be correct, but let it be known that one does not always need to obtain a "commercial loan" for a commercial building, depending on the bank.

SCB would also only give us a commercial loan. In fact i was not impressed with SCB at all, they basically were no help at all, despite us having several million baht in cash accounts with them (i guess this counts for nothing)

We completed the deal today using Krung Thai. I just think it's so strange that Bangkok Bank would have had us paying 100,000THB on signing the loan (in fees and insurance).

The amount we paid to Krung Thai on signing....7,000THB

We didn't even have a Krung Thai account prior to this.

Plus Bangkok Bank would only approve us for 2.5M whereas Krung Thai gave us 2.8M

Edited April 7, 2010 by dave111223

[clinique]

sorry but you did not mention in your original post that it was a commercial loan;;

these are always at MLR + 2or more % points..

Bangkok Bank and Krung Thai would allow us to get a regular housing loan for the commercial building.

Whereas Krung Si would only give the commercial loan for this kind of building.

So i guess if you're saying "commercial loans are always MRL+" then i guess this could be correct, but let it be known that one does not always need to obtain a "commercial loan" for a commercial building, depending on the bank.

SCB would also only give us a commercial loan. In fact i was not impressed with SCB at all, they basically were no help at all, despite us having several million baht in cash accounts with them (i guess this counts for nothing)

We completed the deal today using Krung Thai. I just think it's so strange that Bangkok Bank would have had us paying 100,000THB on signing the loan (in fees and insurance).

The amount we paid to Krung Thai on signing....7,000THB

We didn't even have a Krung Thai account prior to this.

Plus Bangkok Bank would only approve us for 2.5M whereas Krung Thai gave us 2.8M

goog to know,,

the banks are not the same,, even differnet branches offerdifferne tproducts..

maybe its just up to theexperience of the officer you talk too,, who knows TIT!!

[aurelius]

Was the insurance optional or required? Were there any interest rate discounts available as a result of taking insurance? I heard that some banks offer 0.25% reduction.

[dave111223]

Was the insurance optional or required? Were there any interest rate discounts available as a result of taking insurance? I heard that some banks offer 0.25% reduction.

At Bangkok Bank the both building insurance and life insurance were required.

At Krung Thai building insurance was required, life insurance was "optional" but it was one of those pressure situations where it appears that loan offices get a commission on the life insurance. So we got the minimum amount of 1 year life insurance which was 1000baht (just to make sure everything went through smoothly if you know what i mean) And we'll stop the life insurance next year.

It also cost us a pair of football boots for the building surveyor, just to make sure the value of the building was high enough. TIT

We did not get an interest reduction at either bank for insurance.

[cshort64]

Hi.

This has been a very interesting read, I'd like to ask a few questions myself as there seem to be some knowledgable folks on this thread. I am living and working in Thailand for a multi-national and have been so for some time. I am married to a Thai national, this too for a long time I am curious about securing a mortgage for a home loan wheter via my wife or myself. I am aware that I cannot get a mortgage easily, I have heard however that Thanachart Bank may offer a home loan if you are 'legally' married to a Thai national but I have yet to verify that. How does the morgage cosigning work if your wife does not work?

Can she get a mortgage based on my income?

I heard that I need to show regular payments into her bank account for several years to prove that there is income not just a lump sum for a down payment, so she show's some level of income...

I'm not sure what is bunk and what is true, any advice would be most appreciated.

Cheers

CHS

[GarryP]

I am in a very similar situation to CHS. One branch of Bangkok Bank have told me that they would grant the mortgage to my wife with me as guarantor. My wife has no income nor even a bank account. I too work for an international company and have done so for quite a number of years. I have been married for over 20 too. That particular BB branch said that the life insurance was compulsory. However, when I checked with another branch of the same bank they were likewise prepared to grant a mortgage to my wife but said that insurance was voluntary. So different requirements by different branches of the same banks. What's new?

My wife will be signing the contract with the developer in the next week and we will start paying the deposit on installments. The home loan will not be needed until next year so we still have time to shop around. At the moment the developer wants to handle coordinating with the bank(s), but I believe I could get a better deal and closer to what I want if I handled it myself. Nevertheless, I am letting the developer do as it wishes until the contract is signed. Once that is done I will step in.

I need a loan of no more than 1.5 mil and I wish to pay it off within 3 years. The banks do not like the short repayment schedule for obvious reasons. So far the minimum period I have heard of is a 5 year mortgage that allows you to repay everything in not less than 3 years.

Ideally, I want to buy the house in my son's name with me as the borrower, but so far that seems unfeasible even though my son is not a minor.

[Soutpeel]

Hi.

This has been a very interesting read, I'd like to ask a few questions myself as there seem to be some knowledgable folks on this thread. I am living and working in Thailand for a multi-national and have been so for some time. I am married to a Thai national, this too for a long time I am curious about securing a mortgage for a home loan wheter via my wife or myself. I am aware that I cannot get a mortgage easily, I have heard however that Thanachart Bank may offer a home loan if you are 'legally' married to a Thai national but I have yet to verify that. How does the morgage cosigning work if your wife does not work?

Can she get a mortgage based on my income?

I heard that I need to show regular payments into her bank account for several years to prove that there is income not just a lump sum for a down payment, so she show's some level of income...

I'm not sure what is bunk and what is true, any advice would be most appreciated.

Cheers

CHS

Mortgage in your name.....very very unlikely.....co-sign for the wife possible....depends on which bank you approach, as you are the co-signature, they will take your earnings into account only, so doesnt matter if the Mrs works or not.

Obviously you need a WP, payslips for 12 months minimum, letter from the Co, passport etc etc....but doable

Know this is fact as did this a few years ago with SCB for the GF, who is now the wife...however it seems from time to time banks change their policys on this...one month ok...next not....

[clinique]

Hi.

This has been a very interesting read, I'd like to ask a few questions myself as there seem to be some knowledgable folks on this thread. I am living and working in Thailand for a multi-national and have been so for some time. I am married to a Thai national, this too for a long time I am curious about securing a mortgage for a home loan wheter via my wife or myself. I am aware that I cannot get a mortgage easily, I have heard however that Thanachart Bank may offer a home loan if you are 'legally' married to a Thai national but I have yet to verify that. How does the morgage cosigning work if your wife does not work?

Can she get a mortgage based on my income?

I heard that I need to show regular payments into her bank account for several years to prove that there is income not just a lump sum for a down payment, so she show's some level of income...

have just been thru this,

all banks will look at mortgages secured by guarantor being farang - does not have to be a wife at all banks.

WP is NOT necessary

Thai does not need to work but better if does, DO NOT transfer fundsto the Thais account, unnecessary..

BBL and Krungsihave approved loans of 8m for me and my business partner, to buy houses...

Cheers

CHS

Mortgage in your name.....very very unlikely.....co-sign for the wife possible....depends on which bank you approach, as you are the co-signature, they will take your earnings into account only, so doesnt matter if the Mrs works or not.

Obviously you need a WP, payslips for 12 months minimum, letter from the Co, passport etc etc....but doable

Know this is fact as did this a few years ago with SCB for the GF, who is now the wife...however it seems from time to time banks change their policys on this...one month ok...next not....