These loans are often known as a mortgage or a home loan, but either way it is labelled, it is essentially a debt. Therefore to ensure that an individual is financially sound to take on this debt, a bank or lender will carry out various checks to give them confidence that the applicant will repay the debt and lessen their risk of lending. Lending to an individual who cannot keep up with their repayments is less lucrative for the bank not to mention costly and timely to manage. 

As part of a mortgage or home loan application, the following checks are likely to arise:

1. Proof of Identity

A lender will need verification on an individual to confirm that they are who they say they are to avoid fraudulent applications. Items requested could include any of the following: passport, birth certificate, identification card, marriage certificate in case of joint applications and even proof of current address that might include recent utility bills or a contract should the applicant be renting a property. 

Guide

Working a Home Loan to Build a Property Empire

2. Proof of Income

A steady proof of income gives a lender reassurance that the individual has sufficient funds to repay the loan monthly. Lenders may request to see an employment contract, payslips and bank statements.

All these documents need to be for the last six months to paint a recent picture of their financial status, and the lender will look to see if the applicant can spend within their means. Lenders will also favour continuous employment. 

3. Credit Check

A credit check is another tool to indicate the applicant's financial status. Several applications to borrow money raises a red flag making them riskier to lend. Credit checks will also be able to gather information on credit card applications and usage and advise if there have been any late payments, which is also a cause for concern.

A lender will want to see timely payments and that expenditure is well within the allocated credit limit. Any late payments or actions taken by another lender to retrieve unpaid credit, will deter a lender. 

Guide

How to save for a deposit, and quick

4. Down Payment/Deposit

Since many home loans and mortgages are taken out alongside a deposit, be prepared that a lender might need to see proof of the down payment or deposit. It could be that they also request proof of source of these funds in a bid to reduce money laundering.

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.

An interest rate is applied to the loan as payment for borrowing the money from the bank or lender. Therefore over the term of the loan, the borrower pays back more than the amount initially borrowed, hence it is recommended to shop around to find the product with the lowest interest rate to reduce the overall borrowing cost.

Working a Home Loan to Build a Property Empire

The monthly repayment is split between capital repayment that reduces the loan borrowed and paying off the interest on the loan. The loan’s interest rate determines both of these amounts, reinforcing the importance of an attractive rate.

Some lenders will allow borrowers to make a yearly percentage overpayment on top of their usual monthly repayments without incurring additional fees. In such cases, the home loan lender will either reduce the length of the mortgage or reduce the monthly instalment figure as dictated by the product’s terms and conditions. Also bear in mind that some lenders charge a fee for overpayments or if a borrower pays off their loan in one lump sum before the expiry of the term.

Tricks on Reducing a Home Loan

Interest rates are set by the country's central bank. Lenders will peg their products against this figure and therefore available home loans can fluctuate depending on the overall economy. Interest rates are influenced by a supply and demand mechanism: demand for credit will push rates up and this figure will decrease with a reduced appetite for credit.

Interest rates will also shift when the economy needs a boost to draw in investors, hence some borrowers will try and remortgage their home loans when the economy is less buoyant and more attractive products become available.

As mentioned, the product's terms and conditions will determine the possibility of paying back a loan early to secure another product. However, if interest rates have drastically dropped, paying fees to exit an existing home loan and paying for a product fee for a new loan can often make financial sense.

Lastly, some banks and lenders might be more flexible than others. This is worth investigating before securing the initial home loan should you forecast that your financial situation might change in the future. In such cases opt for a more flexible lender or product to aid in this transition.

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.

The clear repayment structure also ensures that borrowers know where they stand and what is expected of them financially allowing for easy money management.

For investors home loans are key. Buy-to-let landlords buy property as an investment letting them out to tenants to pay back the home loan or to generate an income. Having someone paying off your mortgage is attractive, and explains the global boom of private investment landlords many of whom build up a large property portfolio.

Guide

Get To Grips With The Payment Terms For Thai Property

That way, even if only a small amount of income is made above the home loan repayments, these figures add up on a larger scale when multiple properties are involved. This when a home loan comes into play.

Unless you are in a position to buy multiple properties in cash, home loans allow individuals to build up a property empire. A mortgage broker will be able to advise the best course of action dependent on your financial position but in essence, some banks allow you to borrow money offsetting it against another property. 

Therefore if you already own a property that is paid off or a vast proportion has been paid off, you can borrow against this to purchase a buy-to-let property should you not have the funds in place for the deposit or the entire cost.

Once this new property is up and running with a tenant in situ generating an income, the surplus funds you accrue from the rent beyond the expenses can be set aside to start saving for a deposit for the next investment property purchase. Once there is sufficient money in the pot, this can be put towards a deposit for the next buy-to-let property purchase. This pattern can then be repeated building a property portfolio. 

The last point to consider is that as a property increases in value, there is the opportunity to borrow more money against it above the original loan. Home loan lenders, banks and mortgage brokers are there to aid in such cases, so tap into their expertise.

Remember the appeal of buy-to-let properties is that once the loan is paid off, any income (subject to outgoings such as taxes) is pure profit created with minimal effort!

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.

Payments are staggered which is more manageable, and it means that borrowers know their outgoings each month. Banks offer home loans to help investors onto the property ladder. Adding an interest rate for the privilege of the loan makes for a lucrative business model for the lenders but some borrowers aren’t so welcoming to these associated costs, so how can a home loan be paid back quicker?

1. Bigger deposit

Saving for a deposit in excess of the home loan requirements works in two ways. Firstly, this reduces the overall home loan amount thus lowering potential monthly repayments as well as decreasing the interest paid on the term of the loan.

Some investors like the idea of paying less to their lender so will go down this route and also allows them to simultaneously save every month for their next purchase due to the reduced outgoings. Other buyers who have a bigger deposit than anticipated instead invest in a more expensive property stretching themselves as much as possible.

Whilst this does not help to pay off the home loan quicker, it is likely to mean that they will stay in the property for longer thus minimising any costs associated with moving.

Guide

How To Save For A Deposit, And Quick

2. Term length

Home loan agreements are for a certain number of years, usually 10 or 20. Since Thai banks require anyone with a home loan to repay it by their 60th birthday, the length of the loan term can be determined by the age of the lender. The shorter the loan, the sooner that it is paid off, and the less interest that is paid.

Guide

Get To Grips With The Payment Terms For Thai Property

3. Overpayments

Some lenders permit overpayments above the monthly agreed amount. Overpaying a mortgage can reduce the length or reduce the monthly repayment amount. Check the loan’s terms and conditions to see whether overpayments are made, and if so, whether there is any penalty for doing so.

4. Remortgage

The last resort is to seek a better product. Mortgage rates are determined by interest rates which can increase or decrease depending on the economic climate. Check the terms of the home loan to see if there is the option to remortgage for a better deal.

Fees might be incurred when changing a product however in the long run these extra payments may make financial sense. It might even be the time to switch lenders too.

Guide

6 Most Popular Types Of Mortgages

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.

The prospect of saving for a deposit may feel daunting, but follow these tops tips and you will be closer to your dream home in no time!

Set a goal

If you have an idea of the type of property you want and how much the bank is willing to lend through the means of a mortgage, you will have an approximate for how much your deposit should be. Set yourself this goal and to encourage you even further draw up a budget goal and stick it somewhere where you will see it everyday, such as the fridge. You will get great satisfaction marking it off as you get closer to your deposit goal.

Assess your outgoings

Track your expenses for a couple of months on a spreadsheet. You may be surprised to see where your money is going. If you are a coffee lover then may this is the time to kick the habit and grab a takeaway coffee once a week rather than on a daily basis, you will be surprised how much money you will save doing this.

Dedicated savings account

Open another bank account purely for your deposit. Take time to research the different products on the market to find one to suit your needs. Some savings account limit the number of withdrawals in lieu of a high-interest rate which is ideal if you are trying to save as much money as possible.

Additionally, ones that make it hard to withdraw money will stop you dipping in on a rainy day. Move your deposit funds into the savings account on the day that you are paid so you are not tempted to spend it. 

Shop around

Are you overpaying for your Internet and phone package? Could your travel costs be cheaper if you bought a monthly pass rather than paying as you go? Take time to look through all of your outgoings to see where any cuts can be made.

Get savvy and request a cheaper package with your existing provider or ditch them altogether if there is a more competitive company on the market. Your providers will be able to tell you your average usage, so you may only need a 3GB Data package for your mobile than the 5GB that you currently have. Click more buy property guide article 

Be realistic

You want to reach your goal as quickly as possible, but be over ambitious and you are likely to have a blowout! Making small cuts here will add up quickly, but cut back on everything and you could find yourself having a spending binge reducing your well-earned savings pot.

• Why Is Buying Near To A Mass Transit Network A Wise Investment?

• How To Successfully Negotiate On The Price Of The Property

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.

It’s a common question among salary earners when it comes to buying a home: “Will I run out of the savings in the future If I choose to pay in cash all at once? And If I resolve to borrow a mortgage from banks, how much would they lend?” In this article, you’ll find the answer.

• With this amount of salary, what will be my maximum monthly installment?

“The maximum monthly installment must not exceed 40% of the borrower’s salary.”

Siam Commercial Bank uses this basis when determining a borrower’s maximum monthly installment. That is the number should not exceed 40% of the borrower’s salary.

Example: How much will be the maximum monthly installment for a borrower with 30,000 baht salary?

30,000 x 40% = 12,000 baht

If the borrower earns 30,000 baht every month, he then can pay up to 12,000 baht as a monthly installment.In the meantime, if the borrower owes a debt, for example a car loan requiring 6,000 baht per month, then the maximum monthly installment for the mortgage will be deducted by this number, which in this case the borrower’s maximum monthly installment will reduce to 6,000 baht (12,000 - 6,000) instead.

• With this amount of salary, what will be my maximum loan amount?

After we knew the maximum monthly installment, we then use this number to calculate the maximum loan amount.

“Installment : loan amount = 7,000 baht : 1,000,000 baht”

The maximum loan amount can be calculated from the borrower’s monthly installment using the ratio 7,000 baht installment per 1,000,000 baht loan amount.

Example: With 12,000 baht monthly installment, what will be the borrower’s maximum loan amount?

Maximum loan amount = (1,000,000 x 12,000) ÷ 7,000 = 1,885,700 baht

A borrower who can afford 12,000 baht monthly installment can request for a maximum loan at 1,885,700 baht.

These methods will preliminarily help borrowers assess their borrowing capacity. However, there are other factors such as the collateral which can alter the numbers. Each bank also has a different loan amount to asset value ratio. For a more precise numbers, please ask your bank accordingly.

For those who don’t own much saving or long-term income record and feel uncertain about mortgage qualification, you can try our mortgage calculator beforehand, or if you’re an investor, please read more insights about Bangkok property market and home tips, check out DDproperty Property Index Report , DDproperty Property Market Outlook Report and Property guides 

There are a number of mortgages on offer and you may want to choose the one which best suits your needs.

Figure out how much you can afford, how much you should borrow, How much will you save by refinancing your loan and more. Click Mortgages Calculator 

6 Most Popular types of mortgages

1. Fixed rate mortgages

With this package, your repayments are fixed and there will be no change as to the amount you are required to pay even if you are struggling financially. Often there is a penalty involved if you do not pay on time or if you end the mortgage early.

2. Variable rate mortgages

This type of package seems to be very popular with home owners. In this case, the lender sets what the interest rate is which allows for more flexibility in repayment. However, there may be a delay as the mortgage provider might change the rates from time to time.

3. Tracker mortgages

These mortgages are set at a fixed percentage but they change over time to match rate changes made by the bank. What this means is that your payments may increase if the mortgage rate rises. However, you will pay less if the rate decreases. If you think that the financial climate is not doing well and this would cause the mortgage rate to decrease, then this is a good package to gamble on.

4. Offset mortgages

This package is a good solution if your current or savings account is on credit. If you read through the terms and conditions of an offset mortgage, your balance will cancel out some of the borrowings and you'll just need to pay interest on what's left. This type of mortgage can be risky because if you spend any of your savings, then the amount of interest-free borrowing will decrease. However, it is a good way of keeping payments down if you expect to be in credit over the full term.

5. Repayment mortgages

This type of mortgage will guarantee you ownership of your home in the long term, but there is just one catch- repayment mortgages cost more. Monthly repayments will go towards clearing your interest fee and paying back your initial borrowing. This package is good if you are facing financial problems or if you expect a wage increase in the future.

6. Interest only mortgages

In this package, your monthly payments cover the cost of the interest, but you do not have to pay off the capital value of your home. This is a good way of keeping repayment costs down. However, in the long term, you will be required to pay off any a certain amount of money. Usually, this will be the amount you borrowed initially. If you cannot pay the remainder of what you owe, then you stand the risk of losing your house.

Stay abreast of the industry’s news and updates sending directly to your inbox, sign up here.