HOME MORTGAGE LENDING PRACTICES

For most individuals, a home loan is usually the largest amount they will borrow in their life-times. In Thailand, financial institutions allow home loan purchasers to  borrow an amount equal to a multiple of their monthly ncomes. Normally, home buyers monthly mortgage payments should not exceed 35 per cent of monthly incomes. Most financial institutions, however, don’t have ceilings on home loans amounts. They are normally only concerned with the borrower’s credit worthiness i.e. whether the borrower can make the monthly principal and interest payments. However, in general, no home-loan can exceed the home’s appraisal value. 

LOAN-TO-VALUE RATIOS

All Thai banks establish maximum loan-to-value ratios for home mortgage loans. In general, Thai banks will not permit loan-to-value ratios to exceed 70-90% of the purchase price or appraised value. However, the Government Hous ing Bank offers loans of up to 100% for some specific welfare programs such as mortgage loans to Government Pension Fund members.  The Bank  reduces its default risk on these loans byautomatically deducting monthly installment payments from the buyer’s salaries.

LOAN TERM OR REPAYMENT PERIOD

Because home mortgage loans are normally for large amounts, they are usually long-term loans that are amortized over many years. Thai financial institutions generally provide home loans for20 to 30 year terms.

Interest rates are fixed for three to five year periods and then adjusted to market rates for additional periods.

Some Thai financial institutions further limit loan-terms if buyers exceed a certain age.  In these situations, a borrower’s age and the loan term must not exceed 70 years. For instance if a borrower is 55 years old, the financial institution will limit the loan term to15 years.

Most home-owners generally repay their home loans prior to theend of the original loan-term because their incomes rise over time or they sell their original homes or purchase new homes.