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Expat Money Matters – International Retirement Planning

Expat Money Matters – International Retirement Planning - Krabi Magazine article
Mortgages for foreigners buying property in Thailand

A recent article covered the viability of adding property to a bespoke retirement ‘portfolio’ to add diversification, create a passive income stream from rentals in order to supplement income needs and mitigate overall risk – but how to go about raising the finance to do it ?…

It has never been easy to obtain a residential mortgage loan in Thailand as a foreigner, and what offerings there were seemed to come and go with the winds of political change in the Banking sector and the various overseas and local financial crisis’ of the last two decades.

Lending to foreigners wishing to buy property in Malaysia, Singapore, and Hong Kong for example has long been available so it is good to see some of the Thai banks providing loans again to those seeking to buy a place in the ‘Land of Smiles’.

There are currently two major Banks with overseas branches publishing loan offering guidelines to non-Thais wishing to acquire freehold condominiums in a number of locations throughout the country – Bangkok, Phuket, Pattaya, and Hua Hin for example. This can be an expensive way to raise capital however as there are a plethora of associated costs that will be tacked onto these offerings. We note higher than usual interest rates, early repayment penalties, set up and processing costs, valuation & legal fees, plus mortgage protection and the banks own life insurance premiums. In general these types of structures are for the higher end purchases and don’t really make economic sense at under BHT 10m borrowed, which at 70% loan to valuation would mean buying a property at around BHT 15m.

Individuals with a Thai spouse, work permit, and one year visa however may prefer to seek advice from a local Thai Bank (in Thailand) as some will offer loans to foreigners and their spouses in joint or sole names for condominium purchases.  The Thai spouses name will be used as landlord for the property with the foreign husband/wife as guarantor. In many circumstances this will be an easier and significantly less expensive proposition with more competitive interest rates and longer repayment periods.

‘The key to a successful application is knowing in advance what the bank’s lending criteria is and then being able to verify a historical and likely future level of income to service the repayments. It is essential therefore to spend time evaluating the likelyhood of an approval being granted prior to submitting the required paperwork.’

There is a place in the market for loans to foreigners and there is certainly a demand for same, but one should be fully aware of the conditions, fees and added risk involved with borrowing money in a different currency to that of one’s income and/or capital base.

It is also possible with the right guidance to release cash from existing assets held offshore to then be able to buy property (or anything else for that matter ) on a cash basis, which we will cover in future articles.

By Jerry Dingley

Jerry Dingley has been advising expatriates & international investors in the Asia Pacific region for 25 years. Specialist areas include expatriate retirement schemes, family trusts, inheritance planning, wealth protection vehicles, private client portfolios & QROPS UK Pension transfers. 

ppshk@netvigator.com

Important Note: This article contains general information only and is not intended to be taken as specific financial advisory, investment, or tax advice.