Property Mortgages in Thailand

Property mortgages in Thailand operate under a civil law framework that provides lenders a real right of security over immovable property. However, unlike many Western systems, mortgages in Thailand are not market-driven commodities but legal instruments subject to strict procedural formalities, regulatory limitations, and foreign ownership restrictions. Understanding how property mortgages work in Thailand requires an appreciation of both the civil legal code and the economic policies underlying land use and financial risk.

I. Legal Framework

The mortgage system in Thailand is codified under:

• Civil and Commercial Code (CCC), Sections 702–756

• Land Code Act B.E. 2497 (1954) – governing land ownership and title deeds

• Condominium Act B.E. 2522 (1979) – for co-owned freehold units

• Foreign Exchange Regulations (Bank of Thailand) – regarding loan repayments across borders

A mortgage (Thai: chakak) in legal terms is a non-possessory security interest over immovable property, such as land, buildings, or condominium units, granted by the borrower (mortgagor) to a creditor (mortgagee) to secure a debt or obligation.

II. Mortgage Characteristics under Thai Law

A. Mortgaged Asset Types

Only immovable property may be mortgaged under Thai law. This includes:

• Land with full title deed (Chanote)

• Buildings erected on land

• Condominium units (subject to ownership qualifications)

• Leasehold rights over immovable property (if registered and accepted by lender)

B. Registration Requirement

A mortgage must be:

1. In writing

2. Registered with the Land Department in the jurisdiction where the property is located

Unregistered mortgages are void and unenforceable against third parties.

C. Secured Debt

The mortgage must specify the amount of the secured obligation, which may be:

• A loan principal amount

• A future or conditional obligation

• A limit on a credit line facility

Unlike some systems, floating charges are not recognized under Thai law. Each obligation must be clearly identified.

III. Who Can Mortgage Property?

A. Thai Nationals and Entities

There are no legal restrictions for Thai citizens or Thai-incorporated companies to mortgage land or property they own.

B. Foreign Nationals

Foreigners may not own land under most circumstances. Therefore:

• Foreigners cannot mortgage Thai land, unless granted land ownership via BOI approval or investment promotion.

• Foreigners may mortgage condominium units, provided:

  • The unit is legally owned under the foreign ownership quota (49% of the condo project’s area)

  • The unit was acquired via properly documented foreign currency transfer (FET form)

Foreign borrowers must often present additional collateral or a Thai guarantor to secure financing.

IV. Types of Mortgages and Lending Institutions

A. Institutional Mortgages (Bank Loans)

Commercial banks, both Thai and foreign (with local branches), provide the bulk of property financing. Common features include:

• Maximum LTV (Loan-to-Value): 70%–90% for Thais; 50%–70% for foreigners

• Tenure: Up to 30 years for Thais; typically 10–20 years for foreigners

• Interest: Fixed for initial years, then variable based on MLR or MRR

• Documentation: Proof of income, employment, land/condo title, building permits

Leading institutions include Bangkok Bank, Kasikornbank, SCB, and foreign banks like UOB and ICBC.

B. Developer Financing

Property developers may offer in-house or promotional financing for condo purchases, especially for off-plan units. These typically have:

• Shorter terms (up to 5 years)

• Higher interest rates

• Balloon payments or lump-sum structures

While convenient, such arrangements often lack the regulatory protections of bank loans.

C. Private Mortgages

Private individuals may act as mortgagees, especially in the context of secured personal loans or seller financing. The mortgage must still be registered at the Land Office to be valid.

V. Mortgage Registration Process

The process involves both legal documentation and Land Office registration.

1. Loan Agreement

A formal loan agreement or mortgage contract must specify:

• Loan amount and repayment terms

• Default clauses

• Secured property details

• Parties’ consent to register

2. Title Deed Examination

The mortgaged property’s title deed (Chanote) is reviewed for:

• Encumbrances or existing mortgages

• Correct ownership

• Usable area

3. Registration at Land Office

The following documents are submitted:

• Identity documents of mortgagor and mortgagee

• Power of attorney (if a representative acts)

• Title deed (and building permit, if applicable)

• Loan agreement

• Application form

4. Fees and Taxes

• Mortgage Registration Fee: 1% of the loan amount (capped at THB 200,000)

• Stamp Duty: 0.05%

• Service charges

VI. Enforcement and Foreclosure

If the borrower defaults, the lender cannot simply take possession of the property. Thai law requires:

A. Court Action

The mortgagee must file a civil lawsuit for repayment and request judicial sale of the mortgaged property. Self-help or private sale is not allowed.

B. Auction Process

The Legal Execution Department conducts a public auction. Proceeds are applied to:

1. Mortgagee’s debt and legal costs

2. Any remaining junior encumbrances

3. Balance returned to the mortgagor

The process typically takes 12–24 months, making it lengthy and procedurally burdensome.

VII. Cross-Border and Currency Regulations

Foreign borrowers or foreign-financed property transactions must comply with Bank of Thailand (BOT) foreign exchange controls.

A. Incoming Funds

• Must be transferred in foreign currency

• Documented with Foreign Exchange Transaction Forms (FET) for amounts exceeding USD 50,000

• Required for:

  • Condominium purchases

  • Repayment of foreign loans

  • Registration of foreign ownership

B. Repayments

Loan repayments to foreign lenders must be in foreign currency and may require BOT approval depending on the structure.

VIII. Tax Implications

A. Borrower’s Perspective

• Mortgage interest on residential property is tax-deductible up to THB 100,000/year for Thai taxpayers

• No deduction is available for investment properties unless declared as business income

B. Lender’s Perspective

• Mortgage interest is taxable income

• Withholding tax may apply if the lender is a foreign individual or offshore entity

IX. Key Considerations and Risks

• Due diligence on the property is essential: verify title deed, land use zoning, building permits, and encumbrances

• Foreclosure risk should be mitigated by ensuring repayment capability or insurance

• For foreign borrowers, currency fluctuation and repatriation limits can impact loan servicing

• Developers may attempt to bypass lending rules by offering non-registered agreements, which lack enforcement protection

• Joint ownership of property (e.g., with a Thai spouse) can complicate the security structure, especially if a divorce occurs

Conclusion

Property mortgages in Thailand are governed by strict statutory rules and require formal registration to be legally enforceable. While Thai nationals can access a wide range of bank financing options, foreign individuals face notable constraints in ownership rights and lending access. Nevertheless, foreign ownership of condominiums and related financing is legally possible under the correct conditions.

Parties should engage in detailed legal due diligence, ensure registration compliance, and, in cross-border cases, understand currency control rules and treaty protections. In the absence of judicial foreclosure alternatives, lenders must evaluate enforcement risk carefully, while borrowers should plan for regulatory and financial contingencies.