Thailand is home for a large number of expatriates and for many, it is the lifestyle, tropical warm climates and reasonable cost of living which are a big attraction.
Pattaya and Jomtien offers around 10km of beach frontage and with much investment put into the area over the past couple years, it is now home to a number of residents who love to walk the beach promenades on a daily basis making the most of fresh sea breeze air, while strolling under the palm trees looking at the blue sky and sea.
The average expatriate looking for work however, often finds it difficult to secure a reasonably well paid and salaried job due to work & visa restrictions for foreigners. As a result, it tends to be the more entrepreneurial type who make it through work barriers and often end up creating their own businesses and companies to earn a living.
Thai nationals, in addition, often find it hard to get well-paid jobs particularly if they were never not educated to a high level. Often with Thai companies, candidates are required to show university qualifications. A person perhaps more than competent to do a job, but without a degree, might be shunned.
When it comes to self-employed and entrepreneurial individuals, for both Thai and expatriates who wish to buy property and obtain finance in Thailand, banks often apply more stringent criteria before they give approval.
A commercial bank would typically expect at least 12 months (preferably 24) of business operations before considering finance and might require to visit an actual office rather than registered address i.e. no real office.
Once established that the business has been around for minimum terms, income is then generally expected to be good and regular and verifiable through bank statements over the course of 12-24 months. If the business is predominantly commission-based with low salaried income, this might prove a sticking point. Commercial banks are required to adhere to the Bank of Thailand regulations which therefore means they have little leeway when it comes to paperwork suitable for finance approval. Foreigners, ass one might expect, are also given extra tough criteria which means few applications succeed.
There are, however, some institutions that see self-employed individuals as a niche in the market and built products suitable for easier finance to encompass this market segment.
Finance companies which are not registered as a bank are publicly listed on the Thai stock exchange and have backings of enough capital, that of which is suitable to be a bank and “make things happen”.
A business model where the finance company predominantly focuses on the collateral, lending no more than they believe can sell the property for to repay the debt when in terms of default. I.e. worst case scenario of borrower walking away from the loan, could they sell the property relatively quick to repay the borrowing.
Take for example a self-employed individual who wishes to buy a condominium at the newly finished “Sands Tower” at Pratumnak beach. With the new beach promenade to walk along, it could be considered a hot area of interest and therefore to a lender, offering finance to buyers in this project should be good business.
A self-employed individual with their own Thai business would be required to show enough paperwork to evidence affordability over a previous 6-12 month period. There are many cases for self-employed individuals where basic income is low (for tax purposes) however annual bonuses or commission payments are large. If the lender is focused on the collateral primarily, they might be more willing to average the total yearly income down to a monthly basis (which includes bonuses etc) rather than count only exactly what is drawn as salary on a monthly basis. This way income multiples are easier to hit for lender requirements. Self-employed expatriate entrepreneurs in Thailand often have income from overseas in addition to Thailand-based cashflow, a finance company which focuses on the collateral first, is again often willing to include and count overseas income and assets as verifiable supporting documents to approve a loan.
The most common reason for a loan application being declined is usually down to the borrower wanting too high a figure compared with the property value. It may be common in many countries around the world to lend up to 90-100% or even more against property values. However, in Thailand, particularly when lending to expatriates, maximum loan sizes come down to around 50-60% and sometimes less dependent on the lender’s appetite to lend on a particular project or floor.
A ground floor car park view of a condo unit is less liquidable to the lender than a top floor sea view unit, for example, so may even lend down to around 40% or be rejected altogether. The second top reason for a rejection is down to the forex issue for foreigners. i.e. showing paperwork to the land office to verify money was remitted from overseas or exchanged from foreign currency in order to purchase a condo. Some lenders prefer to keep clear of the initial purchase of a condo due to the forex land office requirement and wait until after the transfer of title has taken place, than do a cash back/equity release loan with cheque payable to the borrower so they can spend the money as one pleases.
Typically at MBK Guarantee the finance is available up to 60% of the valuation/purchase price. Document requirements would still be similar to that of a bank. However, exceptions are available if good rationale to do business can be provided. A recent example which had been turned away from a commercial bank due to negative credit bureau reporting was found to be an easy hurdle to overcome since only took a few extra documents to show that the negative history had in fact all been fully paid off and was only a matter of time before the centralised reports would be updated.
Interest rates average around 9.65% for equity release with terms for up to 10 years or age 70, whichever comes sooner. Flexibility is available to pay off the loan after three years with no penalty and additional lump sum payments can be made at any time in order to repay the loan early.
For further information on how to “Finance Property & Condos in Thailand”, please feel free to email [email protected]th OR, call 66 (0) 81278 5382 OR, Line ID stuartmaxwellfoulkes. I shall than be happy to assist.
To speak with a native Chinese national, contact Rose on 66 (0) 95648 2913 or WeChat: rose215620 or email [email protected].