Calculating the Optimum Threshold for Entering the Thailand Real Estate Market
Are you considering purchasing property in Thailand? What is the minimum amount required to buy real estate in the Kingdom? Let’s explore this question further…
CONTENT:
- Bank Mortgage
- Loan from MBK Guarantee
- Installment Plan from the Developer
- For housing under construction
- For completed housing
BANK MORTGAGE
Many people around the world take out mortgage loans to buy property. But what about in Thailand? Can a foreigner get a mortgage? Yes, but the process is not easy. Only residents can expect to secure a mortgage from a Thai bank.
A foreigner must meet certain criteria to qualify for a mortgage:
- Have formal employment in Thailand with a valid work permit for at least one year and a stable monthly income of at least 80,000 baht. Notably, the income must be three times the monthly mortgage payment.
- Hold a Permanent Residence Certificate, which is challenging to obtain. This requires maintaining a long-term visa for at least three consecutive years, knowing the Thai language to pass an interview, and paying taxes in the country.
- Have a spouse who is a Thai citizen.
- Be younger than 60 by the end of the mortgage term.
Even if these criteria are met, the bank may still refuse or require a Thai guarantor (a Thai citizen older than 21).
Thai banks do not grant foreigners loans exceeding 70% of the property value. Mortgages are only available for completed properties, with a maximum term of 15 years. The interest rates are higher for foreigners, reaching up to 9% annually, depending on the bank.
Currently, mortgages do not require a down payment, as part of efforts to support people following the COVID-19 pandemic.
LOAN FROM MBK GUARANTEE
A popular way for foreigners to finance property purchases is through MBK Guarantee, an institution established in 2008. It provides real estate loans to foreigners in Thailand. The interest rate is higher, around 10%, and the loan covers up to 50% of the property value. The minimum loan is 1 million baht, with a repayment term of up to 10 years. Borrowers can make early repayments of up to 50% of the loan amount.
No work permit, permanent residency, or Thai guarantor is required. Borrowers can earn income in any country and in any currency. However, this offer is only available for properties in Bangkok and major resort areas such as Phuket, Pattaya, and Hua Hin.
INSTALLMENT PLAN FROM THE DEVELOPER
The most popular home financing option is the installment plan offered by developers. Terms vary by developer, but there are generally two options: interest-free installments for properties under construction and interest-bearing installments for completed properties.
For housing under construction:
Construction timelines for houses and villas in Thailand typically take 9 months, while multi-story condominiums take 3 to 4 years. During this time, developers may offer interest-free installment plans.Payment schedule:
- 1st payment: 35% upon signing the contract.
- 2nd payment: 20% when construction begins.
- 3rd payment: 15% upon foundation completion.
- 4th payment: 15% upon completion of the structure.
- 5th payment: 15% upon project completion and commissioning.
2. For Completed Housing
Developers typically provide various payment options for completed properties. In most cases, the full payment must be made within five years, with interest rates ranging from 1% to 5% per year. Usually, the first payment is at least 30% of the total price.
Additionally, taxes and duties stipulated by the government must be paid when executing a property purchase transaction. These costs are generally split between the seller and the buyer. The buyer is typically responsible for paying the property transfer tax, which is 2% of the property's actual value if purchasing a freehold property (with ownership rights). For leasehold properties (long-term leases of up to 90 years), a lease registration tax of 1% of the property value must be paid.
Let’s explore these payment options using a specific example.
A small studio apartment of about 30 m² may cost around 2,000,000 baht. When purchasing this studio with ownership rights, the transfer tax amounts to 40,000 baht, which is payable once the full property cost has been settled.
If you qualify for a mortgage in Thailand and receive bank approval, you will not need to make a down payment. However, the loan-to-value ratio will not exceed 70%, meaning you must cover the remaining 30%—or 600,000 baht. Thus, you will need 600,000 baht for the initial stage.
For a loan from MBK Guarantee, no down payment is required. The loan-to-value ratio is 50%, meaning you will need to cover 50%, or 1,000,000 baht.
If the developer offers an installment plan for a property under construction, the first payment upon signing the contract will be 700,000 baht.
For a completed property installment plan, the first payment is 600,000 baht.
The professional team at Thailand-Real.Estate will assist you in calculating the exact payment plans for specific properties. For many foreigners, the most convenient option is the developer's installment plan, as developers often offer flexible payment schedules, bonuses, and gifts. They are currently providing especially attractive offers as the Thailand real estate market recovers from the COVID-19 pandemic, doing everything they can to attract buyers.