Income Multiples For Housing Loan

[samran]

Does anyone know generally how much a Thai bank will lend to someone still working in Thailand. In the UK and Australia they tend to use income multiples, which vary depending on the state of the economy and how good your mortgage broker is.

[Sumitr Man]

No such thing in Thailand

Basically you need to put down between 20 and 30% of the purchase price and evidence that you have the means to repay the monthly mortgage amount. In most cases involving Thai-farang couples, this equates to a guarantee from the farang - who'll still need to show that he can make the monthly repayments and may be asked to disclose his earnings-to-borrowing ratio (although this is not always asked for , it is in most cases).

So, you can borrow as much as you can afford is the answer - but the 20-30% down payment is pretty much non-negotiable

SM

[Brew]

//deleted

Edited October 3, 2005 by Brew

[steveromagnino]

well, as far as I can tell here the banks work exactly the same as banks elsewhere; not sure how earnings to borrowing ratio is not the same as an income multiple.. but I also have no idea what the Thai with foreign partner who provides the paychecks process works like... all i can comment on is what i know from my past banking experience and my experience in getting a mortgage here last month.

I am an idiot, so I'll explain myself through the steps we went through when I set up a new bank which was focused on home loan lending mostly...I cannot remember all of it as this was like 7 years ago now....

So... first off there are two issues:

1. what is bank's exposure for a property - we were willing to go to 80% for standalone property live in and 50% exposure for apartments or rental properties with no exceptions except where multiple properties were bundled together as security in which case we would run at 50% of the portfolio although an individual property could go up to 80% even if it was a rental (big tax advantages to running a big mortgage on rental properties vs. where you live)....this was based on an independent valuation. Some banks went up as high as 95% borrowing...usually with higher rates as well; it was a scam really and some got really burnt with apartments

My experience is the Thai banks go through the same steps although will generally go to about 70-80% max on all property types; sometimes the banks will do a deal with a developer; exactly as in other markets, where they know and trust the quality of a to be built.

2. what is your ability to service - we worked on mortgage payments being 35% of income after tax; but for a single person with company car and so on we could be pressed to go as high as 50% with an impressive presentation... particularly if someone had a stable job record, had a budget, had saved the deposit themselves and so on.

Depending on term of the mortgage and prevailing interest rate, ability to service as a percentage of monthly pay check is fairly easy way to confirm the person can pay; that's exactly the same as what the Thai banks did when I approached them.

3. what is our risk you'll default

Most Thai people I associate with don't have foreign partners and they get mortgages all the time...often with a letter of reference from their boss which is why companies like CP, Central, Precious Shipping or so on carry more weight; they are less likely to go bankrupt than XYZ Trading Ltd which is a 1m baht registered capital company with 3 staff and in business a year.

For self employed whose parents had given them the deposit, with no credit record, well we would be more suspicious in the bank I was at, and for a foreign person with possibility of revoked work permit; ability to walk away and so on (look at all the empty defaulted on apartments with Korean/Japanese owners in 1997/98) well the bank has to be more cautious...why lend to a risk when there are plenty of less risky people around to lend to? Of course foreign partner guarantor is something I know little about

So the bank looks at all 3; not just one, to figure out:

- should we lend

- how much as a percent of valuatoin of the property

- what rate can they service at (term, value of mortgage)

And as far as I can tell, perhaps a little less efficiently, the Thai banks go through the same steps as the bank(s) I dealt with and worked at overseas.

I'd say a foreigner with no local support might get 60%-70% borrowing on valuation based on repayments running at somewhere around 35% of net income after tax... with a work permit, history of working here and perhaps a couple of referees who the bank person might know.