When purchasing property, buyers must ask many questions:
- Why am I buying a property?
- Am I looking for a permanent lifestyle residence?
- Do I want to escape for holidays?
- Or is this property an investment to earn rental income and make a profit when I sell?
- Where do I want to buy?
- Do I want to invest in my country or look at opportunities abroad?
- How to finance a condo in Thailand?
The most important question to ask is:
“How am I going to pay?”
Though the process can be similar in most countries, every country has its own rules and regulations that foreigners need to abide by. Thailand is no different.
There are some important things to know about Thailand before looking to buy property.
- A foreigner cannot own Thai ‘land’ in their own name.
- The only property a foreigner can legally own in their own name as a freehold title is a condominium unit.
- Foreigners can own land only under leasehold title.
A common misconception is that a foreigner cannot finance Thai property through a financial institution. Though options are limited, and the requirements are quite stringent, it is possible.
In this article, we will show you the different ways you can raise capital to purchase your dream in this beautiful country. We will highlight advantages and disadvantages, and break down the process for buying no matter your choice.
We will focus on condominiums, as they are the easiest and most secure form of property ownership for foreigners.
Before we dive into how to finance your property in Thailand, there is one vital question people forget to ask: “Should I seek legal advice?”
The simple answer is, “Yes!” Property investment is a huge decision, and it is rare to not seek advice from property legal professionals in your own country. If you are looking to buy in a country where you do not know the culture, language, regulations, and property laws, then hiring the services of a reputable property lawyer is the responsible thing to do.
Later, we will show exactly what your lawyer does for you and why you need them.
What is a condominium?
First, let’s get an understanding of what a condominium is and the different titles that are registered against a condo.
A condominium is defined as a building featuring privately owned property and common property. The owners of condominiums own the land through a Juristic person of the condominium. (The Condominium Act – The Commonly Owned Housing Act of 2522).
In layman’s terms, a “condo” is a living space (unit) that is part of a larger complex. The owner holds legal freehold title over the private residence and a joint interest in common areas of the property. A foreigner can buy and sell a condo in their own name.
Under Thai law, only 49% of any condominium complex can be owned by foreigners. Your lawyer will check this as part of their due diligence because the last thing you want to do is arrive at a settlement and find out that the condo you set your heart on falls outside the foreign quota.
How do titles affect my ownership?
In Thailand, there are two forms of title under which a foreigner can own property – Freehold and Leasehold.
Freehold – Foreigners can hold a freehold title in their own name. The Thai Land Office issues a title deed similar to a strata title.
Condominiums are the only form of property a foreigner can own as freehold. So it is a popular buying choice, and the easiest to obtain. An advantage to freehold title condominiums is they might be used as collateral for further investment.
Leasehold – A foreigner can possess a physical structure (property) as a Superficie or Usufruct entity, but the land it rests on is owned by a Thai National or Thai Limited company.
You can lease the ‘land’ for up to 30 years, with a possibility to extend it for up to 90 years.
The lease is registered with the Thailand Land Office and if sold during this term, the new land owner takes over the existing lease.
Though leasehold titles often relate to villas, or houses and land, it is important to understand this title in popular tourist areas like Phuket and Pattaya are sold as leasehold.
Financing option for foreigners
Cash
As the old saying goes, “Cash is king”. If you have excess liquidity to purchase property, then buying a property with cash is your easiest option.
Advantages:
- You own the property outright.
- You do not need to seek financing in your home country.
- You do not need to worry about interest rates, terms, and repaying a loan.
- With the right legal help, the time from signing a contract to settlement and handover can be much quicker.
Disadvantages:
- Large initial outlay of funds.
- The need to raise funds in order to purchase.
- Potential limit in buying options due to budget.
- No ability to leverage financing if you are buying for investment.
If you are lucky enough to have the cash to purchase your property, there are still regulations you need to be aware of when buying as a foreigner.
All funds for the property purchase in a foreigner’s name must be in foreign currency and show a clear paper trail of where the funds come from (withdrawal from originating bank), the purpose of the funds (purchase of condominium), and proof of currency conversion in the recipient Thai Bank account (Foreign Exchange Transaction Form or FET form).
This can also benefit you as you will often get a better rate converting your money in Thailand than if you were to convert in your home country and then transfer funds.
Your property lawyer can assist you with transferring funds. They will advise how funds are to be disbursed at settlement, help remit funds from your home country to a Thai bank and pay applicable government fees and taxes when your property is registered with the Thailand Land Office.
Financing in your home country
If you do not have excess cash but available property equity in your home country, then it is possible to finance your purchase with your existing financial institution.
Advantages:
- You have an existing relationship and credit history with your institution.
- Interest rates, loan terms, and repayments are generally better.
- You will service the debt in your native currency.
- The time frame for drawdown and access to funds will be quicker.
- You are dealing with property valuations on the property you already own.
- You may have better Lending To Value (LTV) ratios to access equity.
- You may have a larger budget to buy than if you were to rely on cash alone.
- If you are buying for investment/resale purposes, you may leverage your lending for a greater profit.
Disadvantages:
- You will need to service a larger debt in your country.
- You may need to extend the loan term of existing debt, increasing the time until you own your existing home outright.
- You will be liable for fluctuations in interest rates.
- If you are purchasing a rental property in Thailand, then you may be required to provide a rental agreement to your institution.
- Some institutions will not accept foreign rent to service debt in your country.
Obtaining finance in your home country is a viable option, but it still pays to seek financial advice before deciding. Many countries have strict regulations regarding new lending and foreign investment.
To use Australia as an example:
After the financial crisis of 2008, many banks in Australia pushed lending and investment policies to help reinvigorate the property segment.
During the period of 2015, many homeowners were overextended and struggling to service loans with their banks. Australia’s financial regulatory body APRA (Australian Prudential Regulation Authority) cracked down on banks and their responsible lending practices.
Borrowers had to declare the purpose of new funds and new regulations were introduced, that if funds were for investment, they were subject to lower LTV and shorter loan terms. Funds for foreign investment were deemed high risk and came under close credit scrutiny.
In order to enforce responsible lending for financial institutions, customers had to be in a more secure financial position to borrow money.
Foreign Financing
As mentioned above, though options are limited, there are financial institutions that will offer home finance to foreign investors in Thailand. These institutions are based in foreign countries like Singapore but have branches in Thailand.
There are three primary companies that offer to finance to foreigners: Bangkok Bank (Singapore Branch), United Overseas Bank (UOB), Industrial and Commercial Bank of China (ICBC), and MBK Guarantee Co., Ltd (MBK).
We will look at the advantages and disadvantages of foreign financing and then show the specific requirements for each institution.
Advantages:
- Using your Thai property as collateral for a finance mortgage.
- Potential to use property rent for loan repayments.
- Building a relationship to benefit further investment in Thailand.
- Finance to purchase in Thailand when you cannot get financing in your home country.
- Build a credit history within Thailand.
Disadvantages:
- Higher interest rates – Rates will be higher than those offered locally to a Thai National or found in your country.
- Shorter loan terms – Institutions will offer loan terms from 5 to 15 years and stipulate that a loan must be repaid in full before the age of 60.
- Lower LTV – Some institutions will offer an LTV of up to 75% of property value but usually it is 50%. The LTV may depend on the loan amount.
- Loan must be serviced in foreign currency – This can lead to excessive fees and is susceptible to conversion rate fluctuations.
- Strict lending and servicing criteria.
- Strict regulations for foreign residency status.
- Only open to certain nationalities.
- Properties can only be purchased in specific areas.
Banks and institutions that provide mortgages to foreigners in Thailand
United Oversea Banks (UOB)
UOB is a multinational bank headquartered in Singapore. The bank provides international property loans in Singapore, Malaysia, Thailand, Japan, Australia, and the United Kingdom.
UOB property financing terms and conditions in Thailand:
- Property location must be in Bangkok or selected locations
- Only for investment and residential purposes
- Loan-to-value amount up to 70% of the government appraised value or purchase price (whichever is lower)
- Loan currency: SGD, USD
- Loan term up to 30 years
- For expats working under a work permit in Thailand, the minimum salary of an applicant is 140,000 THB with at least 2 years of working time under the work permit. Otherwise, the loan must be serviced in SGD or USD.
One advantage to building a financial relationship with UOB is if you want to look at diversifying and buying property in different countries – Thailand, Singapore, Malaysia, Thailand, Japan, Australia, and the United Kingdom
Industrial and Commercial Bank of China (ICBC)
ICBC is a Chinese multinational state-owned commercial bank. The bank provides mortgages to foreigners wishing to purchase property in Thailand.
The bank will consider applications from any nationalities but is focused on Asian markets and prioritizes applicants from China, Hong Kong, Macau, Taiwan, Singapore, Malaysia, and some other Asian countries in proximity.
ICBC property financing terms and conditions in Thailand
- Property location musts be in Bangkok and its vicinity, Pattaya, and Phuket
- Only available for completed condominiums (no off-the-plan) with a market value of over 2.5 million THB
- Loan amount from 1.5–15 million THB
- LTV ratio up to 60%–70% of the government appraised value or purchase price (whichever is lower)
- Loan currency: SGD
- Loan term 3-15 years
- For expats working under work permit in Thailand, the minimum salary of an applicant is 80,000 THB with at least 1 year of working time.
MBK Guarantee
MBK Guarantee allows applicants from any nationality to apply for a loan without having to work or live in Thailand. Applicants may apply for a loan using the existing property as collateral.
MBK guarantee does not consider financial records or income when approving loans. They provide loans using a property you already own in Thailand as collateral.
You will need to own some property before taking a loan to finance another property.
MBK Guarantee financing terms and conditions in Thailand
- Property location musts be in Bangkok or selected key locations
- Loan amount from 1 million THB
- Loan-to-value amount up to 50% of the government appraised value or purchase price (whichever is lower)
- Loan currency: THB
- Payback period up to 10 years
- Apply loan with collateral as a condominium
MBK Guarantee is considered the number one foreigner-friendly mortgage option in Thailand. If you are already investing in Thailand, then it does not restrict nationality, residency status, work status, or marital status. Revenue from overseas can be used for reference and approval.
The less talked about financing options
Local Financing
If you have enjoyed life in Thailand for several years already, and meet certain residency criteria, it is possible to seek local financing.
There are domestic and international banks that offer lending facilities to foreign nationals in Thailand. These include HSBC, Siam Commercial Bank (SCB), Thai Military Bank (TMB), and Tisco Bank.
These banks offer better rates and terms but have strict residency requirements. An applicant must hold (at the least) an Alien Registration Book showing their permanent residence status in Thailand.
You apply for a loan if you fall into one of the following categories:
- Work in Thailand under a work permit for at least 1-2 years with a stable income
- Hold Thai PR–PR holders may get more loan options with less strict conditions
Spousal Financing
Many expats move to Thailand and find true love. It is natural to set down roots and build a foundation with your spouse. If you marry a Thai National, your spouse may apply for property financing with you acting as guarantor. Thai spouses and foreign guarantors need to be working professionals with stable income and good credit records.
There is one major advantage and disadvantage to this method.
Advantages:
Your spouse can apply for a loan at any local Thai bank they have a history with. They will benefit from all rates, loan terms, LTV’s, and repayment options available to a Thai National.
Disadvantages:
As a guarantor for your spouse’s loan, you do not own the property! The mortgage and title deed are registered in their name. You have no legal ownership over the property you are buying.
Now, this is not meant to deter you from building a home with your spouse, but if something goes wrong and your marriage dissolves, you may have no legal recourse over a property you have helped finance. If this is an arrangement you are looking at, it is essential to speak to your lawyer.
Your Property Lawyer
It may sound a little like a broken record, but as a foreigner looking to invest/purchase property in Thailand, finding and investing time and money into a good lawyer is the best decision you can make.
A trusted property lawyer will save you time, prevent frustration, and help you avoid potential financial loss or litigation. They will be essential if you are looking to ‘finance’ your property through an institution. They are the experts.
To give you a true understanding of how your lawyer helps, let’s look at what they do.
For financing, they will:
- Review loan documents and interpret in need.
- Help with disbursing loan funds to relevant parties.
During the buying process, they will:
- Investigate under due diligence.
This involves researching the background and history of sellers, development companies, buildings, and potential legal complications with any of the above.
- Conduct Title Searches.
This includes confirming title details match registered Land Office records; that the seller legally owns the property and is entitled to sell. They check there are no existing mortgages, liens, debts, or legal proceedings held against the property.
- Review contracts (Purchase & Sales Agreement) to make sure details are correct and fair for the seller and the buyer.
Unlike contracts in Western culture, many contractual agreements in Thailand do not focus on hard numbers, but on the relationship between the buyer and seller. Think of it as the “Gentleman’s Agreement” or “Handshake deal”.
Unfortunately, this means contracts may omit several important conditions or clauses. Your property lawyer will translate and recommend important conditions you should include to protect yourself. Reviewing contracts is essential when buying condominiums, especially in tourist areas like Pattaya or Phuket.
- Reconcile transfer and payment of funds.
In any property transaction, the most important aspect is the money. We will dissect this further, but your lawyer will confirm what monies are due (including registration, default clauses, and fees); which party pays the money and fees; and how funds are to be paid (payment schedules).
Your lawyer will make sure that all payments and time frames are fair for both parties and scrutinize any hidden or ongoing costs with you.
- Attend settlement and registration of title at the Land Office.
Your lawyer will give and receive all relevant documents at the time of settlement. They can then act as your liaison with the Thai Land Office to register all documents and pay fees and taxes as per your contract.
- Help protect your assets.
A trusted legal firm can help you look into future risks. What happens in the worst-case scenario of your passing?
We often create a will in our home country to make sure our estate is secure if we die. Thailand does not recognize foreign wills and can be contested in Court.
Thai lawyers can help draft a Thai Will that is recognized in Thailand to cover only assets in Thailand. Though not part of the buying process, it is an important aspect that is often overlooked when we think of protecting assets and providing for our spouses or dependents.
You will work with many service professionals during your buying journey – Real estate agents, finance managers, developers, and property lawyers. It is worth the time to find reputable professionals you can build a good relationship with.
Further financial considerations
No matter how you choose to finance your property in Thailand, there are money matters to consider outside your purchase price.
Currency conversion rates – When you transfer money is important when considering conversion fluctuation. You must transfer at least enough to cover the purchase price and fees. If your currency is strong, you may buy while saving money. But if your currency weakens, you may end up having to spend more of your natural currency.
Ongoing fees – If you purchase a condominium, you will have annual Common Area Management (CAM) fees and Sinking Fund payments. There will be property taxes, registrations and potential income tax if renting.
Rates and repayments: Loan interest rates fluctuate and your repayments may change. Many banks will have early payment fees if you complete the loan quickly, and they often require specific insurance to be in place before approval.
Agent Fees: Your trusted professionals need to be paid. They provide a service and are worth the money. But investing in professionals will ensure your overall property journey is simple and hassle-free. They will save you potential long-term financial pitfalls.
Conclusion
In the end, you have many options when buying a condominium in Thailand. However, for land and houses, there are some restrictions, but our lawyers can provide alternative options to acquire properties indirectly. You have a firm understanding of the options available to you, the professionals who will help, and how you can start the process.
Thailand is a beautiful country and hundreds of foreigners choose to visit and move permanently for lifestyle or investment each year. The process may sometimes feel complex, but if done right, it is quite simple.
Property Lawyers | Conveyancing Lawyers
Reputable legal advice is essential if you are thinking of purchasing your dream in Thailand. Versed in Thai law, a qualified property lawyer will advise and support you through the buying process, dotting the i’s and crossing the t’s.
Siam Legal is a registered legal firm with over 20 years of property conveyancing experience. Their team has offices in the key areas of Bangkok, Chiang Mai, Pattaya, and Phuket, and is well versed in their local areas.
You can contact the Siam Legal office at:
Address: Two Pacific Place Building, 18th Floor, Unit 1806, 142 Sukhumvit Road, Klongtoey,
Bangkok 10110 Thailand.
Phone: 02 254 8900
Mobile: 084 021 9800
Website: www.siam-legal.com
Office Hours: 09 AM – 6 PM
