Post by Fletchsmile on Jun 27, 2017 22:15:06 GMT 7
Foreigners ask from time to time how to obtain a loan to buy their Thai home. There are variations you can do. Here's 3 that we've used personally:
1) Thai Mortgage in Thai wife's name guaranteed by foreigner
This is probably the most common option. We did this just over 10 years ago. I had a Thai work permit and hence Thai income to show, but the bank wouldn't lend to me.
Lending to foreigners is unlikely and most banks are reluctant to do so:
-Banks usually like the name of the person owning the property to be the same as the person borrowing the money, which is one reason for this
-Plus foreigners can't usually own land, which tends to limit foreigners to being involved in buying condos rather than buying houses
-For a foreigner buying a condo in their own name, they have to demonstrate the money came from overseas. So that conflicts with a Thai bank based in Thailand lending to them
At the time my wife was "just" a housewife and not working so no demonstrable income. However, with me as a salaried person with WP they would accept if I was the guarantor. We got a normal mortgage with a fixed rate for the first 3 years
Note:
- You don't have to be legally married to be the guarantor but banks much prefer this. It's more secure for them.
- While working for this bank I helped a very good friend of several years do similar with his long term girlfriend. He had a WP and good salary. I didn't work in the mortgage department, but having a senior manager of the bank vouch for someone obviously helps. It proves that legally you don't need to be married.
- I also helped to get approval for a same sex partnership (who can't be married under Thai law). Loan to Thai guaranteed by foreign partner with WP. In this case they would only lend 50% though.
2) Thai "Surrogate Loan" to Thai wife.
We recently did this. The surrogate loan is more commonly used for self-employed people. For this they wanted to see that my wife had something related to work/ self employment. She is still mainly a housewife, but she happens to be a shareholder and director in a Thai company. This fulfilled this part of the criteria.
The interesting part though and how much they would lend, was that the loan was based on her assets held with the bank, nothing at all relating to the company. This is the way the "surrogate" part kicks in.
Basically they looked at her average assets with the bank over the last 6 months. They would count cash and investments / mutual funds. They then took 4% of this as the amount able to service the loan. For Thai banks ability to service a loan is the biggest thing they look for.
Anything in joint names was halved. As I no longer have a work permit, my assets count for nothing
and they didn't want me as a guarantor. Although I did have to sign paperwork saying I would be jointly liable. Overseas investments couldn't be counted only those in Thailand. So another reason of many why building investments here can make sense.
We got the loan thru Standard Chartered using their Mortgage One product. A bit of a rush as the cut-off was June due to the Tisco takeover. Mortgage One is the best mortgage product I've seen in Thailand. I'll write a bit more on that later. Tisco will retain this product.
We or should I say my wife, got a 30 year mortgage. Tenor can be longer on loans to self-employed, whereas for an employee it usually goes up to age 55.
It's a discounted rate for 3 years.
Year 1 MHR - 4.25% = 2.73%
Years 2 & 3 MHR - 3.25% = 3.73%
Year 4 onwards MHR -2.00% = 4.98%
There's a further 0.25% off the 1st year rate if you take their MRTA insurance but I decided it wasn't worth it.
They lent 70% of the house price. I think this was more to do with the size of the loan and their capital requirements under Bank of Thailand rules rather than our credit standing
3) SGD Overdraft loan from Singapore secured by investment portfolio
We recently used this to finance the remaining money the loan we didn't borrow in Thailand. Everything was arranged via our bank in Singapore without physically visiting.
This is an extremely flexible arrangement where they will lend up to 70% against certain qualifying investments. i.e up to 70% loan to value (LTV). In our case these were: mutual funds, some of our Singapore REITs and some blue chip shares like Apple, Siemens, AXA etc which qualified. Investment trusts didn't qualify nor did ETFs
As an overdraft we can withdraw and repay amounts any time providing we are within our limits. The overdraft account and all investments are in joint names.
To some extent there is some currency risk here, as we borrowed in SGD and transferred the money to Thailand to buy a house in THB. However, we will service the loan and pay the interest via investments also in SGD. In addition SGD is a reasonable currency that correlates quite well with THB. It's much less volatile than GBP/THB or USD/THB and in my view borrowing in SGD a better choice than either USD or GBP
This is where looking at a full banking relationship can come in handy. While our bank in Singapore doesn't necessarily have a great trading platform for shares and has a somewhat limited range of unit trusts/ mutual funds, if they can be used as collateral for a loan it's a different ball game
The interest rate is based on Sibor + a margin added on. So is a variable rate. Currently it works out at only 1.96% per annum.
Given we have a portfolio of Singapore REITs that yields (just under after recent gains) 7% in SGD then I've no real worries on servicing the loan
The key risk here is obviously a severe stock market crash so that your loan then exceeds 70% of the amount of your investment portfolio. Otherwise you get margin calls and need to top up/ repay or sell investments. So keeping a large buffer and not borrowing near your limit is a sensible move. Our aim is to not borrow more than 50% by LTV, and keep other investments in reserve that could be pledged as collateral if needed.
1) Thai Mortgage in Thai wife's name guaranteed by foreigner
This is probably the most common option. We did this just over 10 years ago. I had a Thai work permit and hence Thai income to show, but the bank wouldn't lend to me.
Lending to foreigners is unlikely and most banks are reluctant to do so:
-Banks usually like the name of the person owning the property to be the same as the person borrowing the money, which is one reason for this
-Plus foreigners can't usually own land, which tends to limit foreigners to being involved in buying condos rather than buying houses
-For a foreigner buying a condo in their own name, they have to demonstrate the money came from overseas. So that conflicts with a Thai bank based in Thailand lending to them
At the time my wife was "just" a housewife and not working so no demonstrable income. However, with me as a salaried person with WP they would accept if I was the guarantor. We got a normal mortgage with a fixed rate for the first 3 years
Note:
- You don't have to be legally married to be the guarantor but banks much prefer this. It's more secure for them.
- While working for this bank I helped a very good friend of several years do similar with his long term girlfriend. He had a WP and good salary. I didn't work in the mortgage department, but having a senior manager of the bank vouch for someone obviously helps. It proves that legally you don't need to be married.
- I also helped to get approval for a same sex partnership (who can't be married under Thai law). Loan to Thai guaranteed by foreign partner with WP. In this case they would only lend 50% though.
2) Thai "Surrogate Loan" to Thai wife.
We recently did this. The surrogate loan is more commonly used for self-employed people. For this they wanted to see that my wife had something related to work/ self employment. She is still mainly a housewife, but she happens to be a shareholder and director in a Thai company. This fulfilled this part of the criteria.
The interesting part though and how much they would lend, was that the loan was based on her assets held with the bank, nothing at all relating to the company. This is the way the "surrogate" part kicks in.
Basically they looked at her average assets with the bank over the last 6 months. They would count cash and investments / mutual funds. They then took 4% of this as the amount able to service the loan. For Thai banks ability to service a loan is the biggest thing they look for.
Anything in joint names was halved. As I no longer have a work permit, my assets count for nothing
and they didn't want me as a guarantor. Although I did have to sign paperwork saying I would be jointly liable. Overseas investments couldn't be counted only those in Thailand. So another reason of many why building investments here can make sense.We got the loan thru Standard Chartered using their Mortgage One product. A bit of a rush as the cut-off was June due to the Tisco takeover. Mortgage One is the best mortgage product I've seen in Thailand. I'll write a bit more on that later. Tisco will retain this product.
We or should I say my wife, got a 30 year mortgage. Tenor can be longer on loans to self-employed, whereas for an employee it usually goes up to age 55.
It's a discounted rate for 3 years.
Year 1 MHR - 4.25% = 2.73%
Years 2 & 3 MHR - 3.25% = 3.73%
Year 4 onwards MHR -2.00% = 4.98%
There's a further 0.25% off the 1st year rate if you take their MRTA insurance but I decided it wasn't worth it.
They lent 70% of the house price. I think this was more to do with the size of the loan and their capital requirements under Bank of Thailand rules rather than our credit standing
3) SGD Overdraft loan from Singapore secured by investment portfolio
We recently used this to finance the remaining money the loan we didn't borrow in Thailand. Everything was arranged via our bank in Singapore without physically visiting.
This is an extremely flexible arrangement where they will lend up to 70% against certain qualifying investments. i.e up to 70% loan to value (LTV). In our case these were: mutual funds, some of our Singapore REITs and some blue chip shares like Apple, Siemens, AXA etc which qualified. Investment trusts didn't qualify nor did ETFs
As an overdraft we can withdraw and repay amounts any time providing we are within our limits. The overdraft account and all investments are in joint names.
To some extent there is some currency risk here, as we borrowed in SGD and transferred the money to Thailand to buy a house in THB. However, we will service the loan and pay the interest via investments also in SGD. In addition SGD is a reasonable currency that correlates quite well with THB. It's much less volatile than GBP/THB or USD/THB and in my view borrowing in SGD a better choice than either USD or GBP
This is where looking at a full banking relationship can come in handy. While our bank in Singapore doesn't necessarily have a great trading platform for shares and has a somewhat limited range of unit trusts/ mutual funds, if they can be used as collateral for a loan it's a different ball game
The interest rate is based on Sibor + a margin added on. So is a variable rate. Currently it works out at only 1.96% per annum.
Given we have a portfolio of Singapore REITs that yields (just under after recent gains) 7% in SGD then I've no real worries on servicing the loan
The key risk here is obviously a severe stock market crash so that your loan then exceeds 70% of the amount of your investment portfolio. Otherwise you get margin calls and need to top up/ repay or sell investments. So keeping a large buffer and not borrowing near your limit is a sensible move. Our aim is to not borrow more than 50% by LTV, and keep other investments in reserve that could be pledged as collateral if needed.
