Financing for Foreigners in Thailand

Financing

When we buy a property back home, one of the fist things we would think of is financing.
Even for those who have sufficient funding and liquidity for an acquisition, financing is
often seen as a means of leveraging our investments. For buyers with less access to
funding, financing is an indispensable vehicle they use to own that dream home. In this
instance, Thailand is the same as any other country. Most of the financial institutions in
Thailand provide loans for real estate purchases to local Thais and Thai companies based
on similar criteria we are used to in our home country. However, the similarities do end
there for most foreigners buying property in Thailand.

Foreigners generally cannot mortgage properties in Thailand. In fact, mortgage lending

by local banks to foreigners was virtually unheard of in Thailand. Nonetheless, in recent
years we have seen a slight shift in policies to allow foreigners limited access to
financing. This was instigated, in part, by the Thai government’s eagerness to promote
tourism and to encourage economic growth in Thailand. This was introduced during the
high growth period of the past five years leading to Thailand’s current climate which can
now be best described as moribund. Despite this, the momentum gained from the past
few years has meant that some Thai banks do offer financing services to foreigners but
impose rather strict terms and conditions on their availability. The most important
condition is that the property has to be held in the foreigner’s own name and the property
has to be registered as a condominium under the Condominium Act since foreigners are
restricted to purchasing only these types of properties in Thailand.

Local Lending in Thailand

Terms of offer for loans in Thailand are dependent on the policies of the Bank of
Thailand for each fiscal term. This is also dependent largely on each bank’s own business
strategies which also vary year by year. Banks in Thailand normally provide personal
loans to individuals and this includes credit card facilities, business loans, personal loans
for education or medical treatment as well as personal loans for general use such as the
purchase of a condominium, renovations, car purchases and so on. These facilities are,
subject to each bank’s individual policy, available to foreigners who have lived and
worked in Thailand for a number of years.

In order to obtain these personal loans for the purchase of a condominium, certain
conditions must be met. First of all, it is important to note that these loans are generally
granted on the fair market value of the property and this is usually based on the bank’s
own valuation process. The other important criterion is the qualification of the foreigner.
These are set out below in the following:

 At least a 1 year work permit or a Thai resident permit.

 A letter of employment indicating their years of service in Thailand and their
annual salary. Pay slips will usually be attached to this as well.
 The banks may also request for the employer’s company documents or a marriage
certificate if applicable.
 The banks would also conduct credit checks on the foreigner as they would with
any local applicant.
 The applicant’s age combined with the loan period must not exceed 60 years.
 Applicants must have a stable and secure job.
 Applicants must have a fixed income three times higher than each installment
repayment.
 The aggregate amortization of loan must exceed 7 years (for some banks).

The applicant may also be required to submit the following documents to the bank upon
application.

 Copies of passport including visa page, ID card or government official ID card,

house registration certificate, and marriage certificate of the applicant and spouse
(if applicable).
 Confirmation of income or salary, and copies of bank statements for the previous
six months.
 Copies of land or unit title deeds, sale and purchase contracts and construction
specifications if applicable.

The interest rates for these types of loan are typically based on the MLR or on a fixed
interest rate depending on the bank offer at the time. It is also helpful to note that because
these loans are offered locally, the interest rates are usually a bit more competitive and it
does pay to shop around first.

International Home Loan Schemes for Thailand

Around the middle of 2005, Thailand saw the emergence of a new financing service
offered by Bangkok Bank’s Singapore branch. At this time we saw Bangkok Bank
starting to offer offshore financing for foreigners wishing to purchase real estate in
Thailand. Up to 70% of the property’s value was made available to foreigners who did
not qualify for a local loan. This gave many foreigners access to finance for their dream
homes even if they did not reside in Thailand. Up until this time, there were only a
handful of private offshore firms offering lines of credit of this kind and often at rather
stringent and unattractive terms.
Bangkok Bank in Singapore still offers such loans to foreigners and the demand for this
is increasing. They are able to tender loans in several currencies including US and
Singapore Dollars. Currently, the interest rate for USD loan consists of the prime plus
0.5% which in total stands at 8.75%. A processing fee will also be incurred upon
application. Bangkok Bank does insist on meeting the applicants in person and this means
you would usually have to travel to Singapore to apply for this.

Bangkok Bank was the first bank in Singapore to offer such financing services. However,
this year we saw the introduction of United Overseas Bank (UOB) in Singapore jumping
on the band wagon and offering similar lending services to foreigners wishing to
purchase real estate in Thailand. It is a relatively new scheme for UOB and it was
introduced largely as an alternative to Bangkok Bank’s hold on this lucrative market. It is
a good thing that we are starting to see some competition in this area and in the future this
will hopefully create an environment that would improve the consumer’s position with
various banks trying to outdo each other with more competitive rates. At the moment, the
terms for a UOB international loan is still very similar to Bangkok Bank with their
interest rate currently also at 8.75%. However, it appears their processing fee may be
slightly higher but offers the advantage of applying for the loan locally in Thailand
without having to set foot in Singapore. UOB’s entrance into this niche market is a
welcoming sign to the area of financing to foreigners in Thailand.

Criteria for a Mortgage

Mortgages are governed under section 702 of the Thailand Civil and Commercial Code.
In this section, there are certain rules which must be adhered to in order to qualify for
protection under Thai law. These include the following:

1. The mortgager must have the right of ownership of the property.

2. The mortgage contract must be in writing and must be registered an authorized
office; otherwise the mortgage contract is invalid.
3. The parties must register the mortgage to the authorized Officer for the following
cases:

a. Land with Title Deed has to be registered at the Land Department or Bangkok
Metropolis Land Office (Branch) or Provincial Land Office or Provincial Land
Office (Branch) where the land being mortgaged is located.

b. Land with no Title Deed such as Nor. Sor. 3, has to be registered at the
District Office where the land being mortgaged is located.

List of the Banks in Thailand

Below is a list of several banks in Thailand along with their various policies and criteria
on servicing loans to foreigners.

No. Name Terms and Conditions for Qualification of Loan

1. Bangkok Bank PCL. Bangkok Bank in Thailand itself does not provide loans for
foreigners under any circumstances. Only Bangkok Bank in
Singapore provides this service to foreigners.

2. Bank of Ayudhaya Bank of Ayudhaya does not offer loans to foreigners at this
PCL. present moment.

3. HSBC HSBC does provide loans to foreigners under the following

conditions:
 Residence Permit, 1 year work permit, letter of
employment, company’s documents or other pertinent
documents upon request.

 Bank will grant loans for foreigners based on the current

market value:

- Condominium 70% of the value and Land and

House up to 80% of the value.
- An amortization period of 7 years.

4. Kasikorn Bank Kasikorn Bank does not offer loans to foreigners at this present
moment.

5. Siam Commercial Provides loans for foreigners under the following conditions:
Bank PCL. (SCB)
 1 year work permit, consideration based on rate of
salary, background check for the employment and credit
rating.

 The foreigner can receive a loan for a condominium or

house.

 A joint loan can only be obtained between blood

relations.

 Amortization period of between 5-7 years.

For personal loans, SCB only grants credit cards, but not for
personal business loans.
6. Thai Military Bank Provides loans for foreigners (only condominiums) under the
PCL. (TMB) following conditions:

 2 year work permit or 2 years residence permit, passport,

letter of the employment, payment slip and other
supporting documents requested.

 If the foreigner has some added security finance, this

will be an added appendage for the banks to consider.

 If the loan is for landed property, a foreigner will only be

able to obtain a loan if they apply jointly with a Thai
spouse.

7. UOB Public Company UOB in Thailand provides loans for foreigners under the
Limited following conditions:

 A loan for landed property can be obtained by a

foreigner if it is applied jointly with a Thai spouse.

UOB has launched the new International Home Loan Scheme

for Thailand to allow foreigners access to financing when they
wish to buy condominiums in Thailand. This is a joint financing
program between UOB in Thailand and UOB in Singapore.
Loans will be obtained in UOB in Singapore and secured by
SBLC which will then be issued by UOB in Thailand which will
in turn register the mortgage locally.

UOB in Thailand suggests that the entire application procedure

can be done within Thailand without the applicant going to
Singapore.

9. Tisco Bank Provides loans for foreigners for condominium under the
following conditions:

 1 years work permit.

 Tisco will grant loans for foreigners based on the market

value of the property: offers lending for condominiums
for up to 70% of its value.

 Foreigners can borrow a maximum of 5 million Baht

and not less than 700,000 Baht.
  Amortization rate of 10 years.

10. Standard Charter Bank Standard Chartered does not offer loans to foreigners at this
(Thai) Public Company present moment.
Limited
The information in this table is deemed to be accurate at the publication of this article. We do not accept liability for any loss or
damage claimed to be caused by the information provided in this table.

It would appear then that financing is gradually becoming more accessible to foreigners
in recent years. It remains true that financing for foreigners is no still easy task and is
highly dependent on your individual needs and circumstances. Financing terms are still
not what we are used to back home and it is certainly not for everyone. Before applying
for either a local loan in Thailand or an international off-shore loan from either Bangkok
Bank or UOB it is wise to assess the markets first and consult with a reputable financial
adviser or lawyer.

Kert Stavorn BA LLB

Siam Legal