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Thai central bank relaxes LTV rules for mortgages

January 21, 2020


Abstract : The Bank of Thailand (BOT) adjusted credit regulations for the real estate sector and further eased loan-to-value (LTV) regulations, in order to simplify the loan procedures for home buyers with real housing needs

InfoQuest (January 20, 2020) -- The Bank of Thailand (BOT) adjusted credit regulations for the real estate sector and further eased loan-to-value (LTV) regulations, in order to simplify the loan procedures for home buyers with real housing needs on the basis of ensuring that the measures are in line with the principles and objectives of curbing speculative activities and increasing people's savings. The measures will take effect on January 20, 2020.

The amendment is aimed at helping people have their first homes more easily and reducing the burden of necessary expenses for actual occupancy. Although the LTV ceiling for residences valued less than 10 million baht is still 100 percent, borrowers are allowed to take out a top-up mortgage of up to 10 percent to pay for the necessary expenses for the actual occupancy, including costs of house decoration, maintenance and expansion. When this debt turns into a debt backed by a house, the interest rate will be lower than that of unsecured loans. In addition, the minimum down payment for the first home valued above 10 million baht will be reduced from 20 percent to 10 percent.

The relaxation will also make it easier to get the second mortgage for those who pay for the first mortgage in installments on time and want to buy a second residential unit. But the central bank still encourages borrowers to have some savings in hand before getting a mortgage. It relaxed regulations for the second mortgage with homes valued less than 10 million baht. Under the amended regulation, the minimum down payment for the second mortgage is at 10 percent if borrowers have serviced the first mortgage contract for more than two years (previously three years). However, the central bank don't think it is a right time to cancel the LTV cap on the second mortgage, as it turned out that more than half obtained the second mortgage less than a year after getting the first one, suggesting that the mortgages were for speculation rather than out of actual residential demand.

The central bank has also adjusted its loan-sinking fund rules for those who want to build houses valued less than 10 million baht on debt-free land to shore up financial institutions to provide more loans to this group of borrowers.

Source: InfoQuest, by Thapa/ Kasamarporn/ Rachada, translated by Xinhua Silk Road

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Keyword: mortgage real estate Bank of Thailand

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