Buying a home is the biggest purchase of most people's lives, and a mortgage the largest debt most will bear. Locking in cheap home loans can save money on interest payments over time and allow borrowers to spend less time paying off the debt.
Amid the sluggish residential property market dented by the stuttering economy and the Bank of Thailand's tougher loan-to-value requirements, potential homebuyers should shop for low-rate mortgages after three state-owned banks -- Government Savings Bank (GSB), GH Bank and Krungthai Bank (KTB) -- promoted low teaser rates, or introductory rates for the first three years. The mortgages are part of the government's property stimulus measures.
GH Bank and KTB offer the lowest average three-year rate among industry peers at 2.5% a year, but their interest rates differ per year. The debt balance after the mortgage is paid for three years also differs for the two banks.
KTB looks more attractive because it charges a mere 0.5% for the first year, while GH Bank imposes a fixed rate of 2.5% over the course of the first three years.
For example, Mr A signs a mortgage contract to borrow from KTB, while Mr B borrows from GH Bank and both pay 10,000 baht per instalment. Mr A sees his principal decline to 711,085 baht after he services the debt for three years, while Mr B's principal will fall to 720,500 baht, based on a 1-million-baht borrowing. The calculation of Mr A assumes that the interest rate for the second and the third year is equal at 3.5%.
Should borrowers overpay their mortgage, KTB will also help save more on interest payments than GH Bank. Overpaying a mortgage means that the extra payment will reduce the balance of the principal and the debt will be paid off early.
Kasikornbank's K-Expert says paying a loan higher than the due amount is a way to reduce interest charges and shorten the payment period.
Paying 10% of the balance as an overpayment every month could reduce the total interest payment by 21% and shorten the mortgage term by 5.5 years. Paying 20% extra every month could cut the borrower's interest payment by 34% and knock nine years off the loan term.
GH Bank, however, is suitable for those who can afford a lower monthly payment, given its maximum 40-year mortgage terms relative to KTB's 30-year loan.
With the 40-year payment terms, a GH Bank mortgage borrower is required to pay a minimum 3,300 baht a month throughout the first three years for a 1-million-baht borrowing, while the amount will be 6,600 baht per month for a 2-million-baht loan, and 9,900 baht per month for a 3-million-baht loan, said GH Bank president Chatchai Sirilai.
Homebuyers could enjoy a windfall from property stimulus measures. TAWATCHAI KEMGUMNERD
After the first three years, GH Bank's rate will rise to 4.625% for the fourth and fifth years, then to the minimum retail rate (MRR) minus 0.75 percentage points in the case of general borrowers, or the MRR minus 1 percentage point for borrowers whose employees have a special-rate contract with the bank as welfare to workers, from the sixth year to maturity.
GH Bank's 2.5%-rate mortgage is restricted to buying new homes priced at up to 3 million baht. Borrowers are prohibited from refinancing with the bank or other banks for five years.
At KTB, its housing loan will be floated in the second and third years, but the average three years will not exceed 2.5%.
Only those who buy new residential units with a price tag of up to 3 million baht can enjoy the bank's cheap-rate mortgage. But refinancing is not allowed for three years, and the period will be five years for those who choose a mortgage fee waiver plan.
Those who buy homes at specified projects, or physicians, judges, attorneys and lecturers with a rank of assistant professor or above, are entitled to a 1,000-baht-per-month payment in the first year for every 1 million baht of borrowing, said KTB president Payong Srivanich.
The bank's first 1,000 borrowers who comply with the government's Baan Dee Mee Down scheme will get an additional 5,500 baht each. Those who are the bank's 1,001st-10,000th borrowers will be offered a 0.1 percentage point cut in interest rate for the first year.
For those who are seeking loans for refinancing and homebuilding purposes and borrowing more than 3 million baht, GSB is the choice.
The state-owned bank is offering a 0.01% rate with a 10-baht instalment payment for every 1 million baht loaned for the first year. The rate will increase to 4.35% for the second and third years, averaging 2.903% each year for the first three years.
The interest rate for the fourth year onwards will be the MRR minus 0.5 percentage points.
Based on a 20-year mortgage term and a 1-million-baht loan, borrowers are required to pay 3,700 baht a month for the second and third years, and 8,300 baht for the remaining term.
The maximum term loan is 40 years, without a cap on lending amount.
Digital rendition of condominiums in Thong Lor.
Another windfall
Would-be homeowners could also enjoy a windfall from the government's property stimulus measures, which offer cash rebates to those who meet the criteria and may significantly ease the burden of property transaction fees.
The government in late November approved offering a cash rebate of 50,000 baht to the first 100,000 participants to meet the Finance Ministry's criteria, which require them to completely take out a mortgage from any financial institution between Nov 27, 2019 and March 31, 2020 and register at the specified website between Dec 11, 2019 and March 31, 2020.
To be entitled to the cash rebate under the Baan Dee Mee Down scheme, homebuyers who receive a cash rebate of 50,000 baht must have a monthly income of no more than 100,000 baht or 1.2 million baht a year and must be taxpayers in the Revenue Department's tax database.
Houses must be new, but they don't have to be the buyer's first home. No ceiling limit of the home price is required. A PromptPay account tethered to a 13-digit citizen ID number is essential for getting cash back.
Co-borrowers are welcome, but only qualified main borrowers will receive the cash rebate.
Moreover, the property transfer fee is reduced to 0.01% from 2% and the mortgage fee from 1% to 0.01%, which is applicable to those who buy homes priced at no more than 3 million baht before Dec 24, 2020.
With the decrease in transfer and mortgage fees, those who purchase homes with a price tag of 1 million baht and borrow from financial institutions for the full purchase price will be subject to a mere 200 baht in such fees, compared with 30,000 baht under normal circumstances.
