Global Mortgage Finance
(Thailand Property and Land Finance Specialists)
Published 1st February 2017 - Thailand's Property Backed Overdraft Facility...
Thailand, along with it’s paradise Islands including Koh Samui, are often known for a more relaxed way of life, where things tend to go at a slower pace in comparison to places such as, London, Dubai, Hong Kong or Singapore. Singapore for example is known for it’s no nonsense approach to business, rubber stamps and deals done on major transactions in just a few hours. Decision makers making executive decisions in a matter of minutes! In comparison, Thailand is more commonly known for taking several days, weeks and even months on similar decisions with perhaps various runarounds during the process, not always, though is commonly the case. One clear exception to that rule could be the Thai property market, where things can move at an incredibly quick pace, particularly when there is money to be made or even to be saved.
It is questionably a buyers market in Thailand at present with various major deals to be had on property purchases. The Kingdom is going through one of its biggest changes in modern history. With both the Government & Royal transitions now well under way, major changes, come not just with new hopes, but also with an increased uncertainty, as official rubber stamps could come with delay. While this occurs, there are almost always new challenges within business and there will be several that fail to adapt and grow into the new markets. Personal income maybe affected with possible property fire sales on the increase. Knowing which property is an actual fire sale is also a battle, particularly when various “marketeers” promote any old property as a fire sale, just to make a sale. There are of course the well seasoned business entrepreneurs who know full well how to take advantage of this type of market and also those who are so affluent, a possible slow down in business income is no real immediate concern since there are adequate cash reserves.
When an owner of a property makes that decision to sell or even to leave Thailand, it may not have come lightly and the decision to sell may have taken several months, the time than comes when all they want to do …..is sell. Sell, Sell, Sell. The market value of a luxury pool villa maybe say THB 10,000,000 so an owner offers a price to sell at a slight discount of THB 9,000,000 however really, if they were to receive cash within 1 week and be done, may accept considerably less. For those who have “cash”, available in just a matter of days, reasonable savings on property could be made. At that early stage of liquidation, a quick sale for the owner maybe worth the effort, for less stress and a more lengthy uncertainty period in the longer run.
Now when it comes to property finance approval, there is little chance that a bank anywhere in the world and more particularly in Thailand, maybe able to go from start to finish in a matter of days, even more so for foreigners and all on a new property which the bank has never even seen before. An unofficial decision with a 99% certainty of finance in say 3-4 weeks could be granted yes, though actually releasing full funds as cash on the property to purchase would be challenging in just 1 week, particularly using only commercial banks and public listed lenders. There is however an alternative solution for property investors, so they can preferably strike while the iron is still hot, for that property purchase at a discount.
Much like how an Overdraft facility would work, there is a way to provide an instant amount of cash available using Thai property (preferably Condo) as collateral. While this may come with a small set up fee and a little more paperwork, a well versed Thai financial institution is able to pre-approve existing collateral and client backgrounds with a guarantee of finance available in a matter of days for any period up to the next 12 months…..Yes, that was 12 months! You only pay the interest as and when you borrow and your only initial outlay would typically be the appraisal, commitment & lender fee with a possible inspection cost. A pre-agreed sum is than approved for up to 12 months and providing you draw the full amount in the specified period, you may even get the commitment fee back again. The only slight difference to this rather than an overdraft facility is that you will be required to have a monthly installment once the initial loan is drawn & on a repayment of some kind basis however, the concept of almost instant cash readily available with interest payable only when you borrow is there.
Let’s take for example an investor who owns 2 condominium units where the combined value is THB 20,000,000. A lender happens to have this Condo on a pre-approved Thailand Condo Finance Map, which means they can already guarantee finance in around 3-4 weeks, up to 60% value & subject to individual credit profile background checks. The investor however is keen to have pre-approval of up to just THB 7,000,000 and would like this readily available in just a matter of days since they believe our earlier luxury pool villa example, could be purchased for just THB 6,500,000 and would like to move quick to secure the deal in just a matter of days and have a little extra cash surplus just in case.
To approve this loan, sign a contract and have guaranteed for up to 12 months (just in case this purchase doesn’t go through as there will always be others available for using funds) the Condo owner will do the following on this example:
Pay for an Appraisal – Cost is subject to size though is usually between THB 5-15,000
Pay for Lender Fee – 1.25% (THB 87,500)
Pay for a Commitment Fee – 2.00% (THB 140,000)
No fee for inspection this example as “already” on the list.
It than comes in writing that the Lender Fee & Commitment Fee is refundable in full if, the loan is declined or approved below the loan request (this example THB 7,000,000) and also, that once the final contract is signed and loan is fully drawn, you get the commitment fee back again. Once the lender receives all supporting documents and go through an approval process (3 weeks) the owner is than ready with “cash on the hip” so to speak.
Let’s now assume this Condo owner had already pre-approved a loan of THB 7,000,000 several months ago and now was ready with cash on the hip to put in an offer of THB 6,500,000 on that luxury pool. On this occasion, the seller accepted THB 6,800,000 and the deal was closed at the land office in 2 days since the seller was ready to leave Thailand and would accept a lower price just to be relieved from stress and an immediate cash injection.
In summary, it pays sometimes to have cash available “on the hip” rather than wait for a period of time as is easier to discount/ negotiate when the deal is done rather than wait for finance. Pre-approval may take a little time and a little cost, though with up to a 12 month window to close, if there is confidence a property will come available to purchase, it is worth the effort…
At one of the lenders, foreigner friendly terms are available at up to 60% loan to value, up to 10-year tenure and with annual interest from as low 8.575% condo, or 12.0% land/villa & house.
For further information on how to "Finance Property & Condos in Thailand", please feel free to email enquiry@globalmortgagefinance.com OR call 66 (0) 81278 5382 and either shall be happy to assist.
Link to Website of Samui Phangan Real Estate Magazine where Published - Link