Are you thinking of buying property in Thailand? What is the minimum amount required to purchase housing in the Kingdom? Let us consider this issue…
Content:
Bank Mortgage
People all over the world take mortgage loans to buy real estate. What about in Thailand? Can a foreigner obtain a mortgage? Yes, they can, but it’s not a simple process. Only a resident of the country can expect to borrow money from a Thai bank.
There are certain criteria that a foreigner must meet to receive a mortgage:
- Have a formal job in Thailand, with a work permit for at least one year and a stable income of at least 80,000 baht per month. Importantly, your income must be at least three times higher than the monthly mortgage payment.
- Hold a Permanent Residence Certificate (which is not easy to get - you will have to extend a long-term visa for at least three consecutive years, know the Thai language to pass the interview and pay taxes in the country).
- Have a spouse who is a Thai citizen.
- Be younger than 60 years by the end of the mortgage tenor.
Even if you meet these criteria, the bank may refuse to issue a mortgage or demand a Thai guarantor – a citizen of Thailand older than 21 years.
Thai banks do not grant foreigners loans with the loan-to-value amount higher than 70%. You can only obtain a mortgage for a completed project, and for a maximum of 15 years. The interest rate is higher than that for Thai citizens, at up to 9% per annum, with specific terms varying from bank to bank.
A mortgage is currently granted with no down payment – this is one of the attempts to support people after the complicated situation during the COVID-19 pandemic.
.jpg "Calculating the Optimum Threshold for Entering the Thailand Real Estate Market")
Loan at MBK Guarantee
The most popular way of getting a property loan among foreigners is MBK Guarantee – an institution established in 2008 that actively finances real estate purchasing in Thailand by foreigners. The interest rate here is higher than at the bank, at approximately 10%. The loan-to-value amount is up to 50%, the minimum loan is 1 million baht (to be repaid within 10 years). The loan is repaid in monthly installments, with an early repayment option of up to 50% of the loan amount at the end of the tenor.
You do not need a work permit, a Permanent Residence Certificate or a Thai guarantor to get a loan. The borrower can receive income in any country and in any currency. This offer is only valid for real estate in Bangkok and the country’s major resorts in Phuket, Pattaya, and Hua Hin among others.
Installment Plan from the Developer
The most popular home loan option is an installment plan from the developer. The terms depend on the specific developer. There are usually two options – an interest-free installment plan in case of buying a facility during construction and an installment plan with interest for completed housing.
1. For housing under construction
Construction of houses and villas in Thailand takes an average of 9 months, multi-story condominiums take 3 to 4 years. This is the period for which the developer may offer an interest-free installment plan.
In this case, the payment schedule is usually as follows:
- 1st payment: 35% – upon signing the contract;
- 2nd payment: 20% – upon start of construction;
- 3rd payment: 15% – upon completion of foundation;
- 4th payment: 15% – upon 100% shell completion;
- 5th payment: 15% – upon end of construction and facility commissioning.
2. For completed housing
Developers may offer various payment schedules for completed projects. The whole amount usually needs to be paid within five years, with the interest from 1% to 5% per annum. Most often, the first payment is at least 30% of the total amount.
Additionally, taxes and duties stipulated by the state must be paid when orchestrating a property purchase & sale transaction. They are split between the seller and the buyer. The buyer usually pays the tax on transfer of the property, which is 2% of the actual housing value in case of buying a freehold property (with the ownership right). If you buy a leasehold property (a lengthy lease for the term of up to 90 years), the lease registration tax should be paid, which equals 1% of the value.
Let us consider payment options using a specific case study.
A small, approximately 30 m2 studio may cost you 2,000,000 baht. When you buy this studio with the ownership right, the tax on transfer of property is 40,000 baht, payable after you have paid the whole facility cost.
If you are entitled to receive a mortgage in Thailand and the bank has approved it, you will not have to make a down payment. The loan-to-value amount, however, will not exceed 70%. So you will have to shell out the remaining 30% – 600,000 baht. In summary, you need to have 600,000 baht at the first stage.
If you take a loan from MBK Guarantee, you will not have to make a down payment to this institution either. The loan-to-value amount is 50%. So you will have to pay the other half of 1,000,000 baht.
If a developer offers an installment plan for a facility under construction, the first payment upon signing the contract will be 700,000 baht.
If a developer offers an installment plan for a completed facility, the first payment is going to be 600,000 baht.
Professional staff at Thailand-Real.Estate aggregator will help you calculate the payments for specific properties. The most comfortable option for a foreigner is an installment plan from the developer. Developers, in their turn, offer different payment schedules, worthwhile bonuses and gifts. They are currently offering particularly good bargains, whilst the Thailand real estate market has not yet recovered from the COVID-19 pandemic, they are doing everything in their power to attract clients.