Property Mortgages in Thailand

Property mortgages in Thailand are real right established by law, allowing a creditor to secure repayment of a loan by placing a charge over immovable property. The legal basis, enforcement procedures, and commercial practices around mortgages in Thailand differ significantly from those in common law jurisdictions. Understanding the interplay between Thai civil law, financial institution regulations, and foreign ownership restrictions is essential for both local and international borrowers, lenders, and investors.

I. Legal Definition and Governing Law

Under the Civil and Commercial Code of Thailand (CCC), a mortgage is defined as a real right created to secure the performance of an obligation, typically a loan, by registering the mortgage over immovable property or certain specified movable assets.

Relevant statutory provisions:

• CCC Sections 702–756 (mortgage law)

• Land Code (registration and title)

• Bank of Thailand (BOT) regulations (applicable to licensed financial institutions)

A mortgage allows the creditor (mortgagee) to enforce the security through judicial proceedings in case of debtor default, but does not transfer possession or ownership of the mortgaged property to the lender.

II. Types of Property Eligible for Mortgage

Mortgages may be registered over the following immovable assets:

1. Land with valid title (e.g., Chanote or Nor Sor 3 Gor)

2. Buildings registered with the Land Office

3. Condominium units under the Condominium Act

4. Long-term lease rights exceeding 3 years (in practice, limited use)

5. Superficies or usufruct rights, though rare and often subject to lender policies

Movable property can also be mortgaged under the Business Security Act B.E. 2558 (2015), but this is outside the traditional land mortgage framework.

III. Mortgage Registration Process

A mortgage must be formally registered at the local Land Office where the property is situated. Requirements include:

• Land title deed (Chanote or equivalent)

• Mortgage contract specifying the loan amount, term, interest, and enforcement rights

• ID/passport and house registration of borrower and lender

• Power of attorney (if acting through a representative)

• Consent from the spouse (if the property is jointly owned)

Registration fee: 1% of the mortgage value
Stamp duty: 0.05%, subject to a ceiling

Registration is the constitutive act—without it, the mortgage has no legal effect against third parties.

IV. Commercial Mortgage Practices

A. Thai Nationals

Thai borrowers may obtain mortgage financing from commercial banks, state-owned banks (e.g., Government Housing Bank), or other licensed lenders. The standard lending-to-value (LTV) ratio ranges between 70–90%, depending on property type and borrower profile.

Key features:

• Fixed or floating interest

• Terms up to 30 years (residential)

• Debt service ratio typically capped at 35–40%

• Property appraisal required by bank

B. Foreign Nationals

Foreigners face significant limitations:

• Cannot own land outright (except via BOI or treaty exceptions)

• May mortgage condominium units if they hold ownership under the Condominium Act

• Generally cannot mortgage land, even if leased

• Few Thai banks lend to foreign individuals; financing may be available via:

  • Offshore lending with security held in Thailand

  • Developer-backed financing

  • Private financing with caveats

A foreign lender wishing to register a mortgage in Thailand must obtain approval under the Exchange Control Act, unless denominated in Thai Baht.

V. Mortgage Structure and Terms

A typical mortgage contract will include:

• Principal: Registered value may be equal to or less than the loan

• Interest rate: Either fixed, floating, or hybrid; must comply with BOT interest rate caps

• Repayment term: Specified duration with monthly installments

• Default provisions: Late payment interest, acceleration clauses

• Enforcement rights: Judicial execution and auction sale

The mortgage may also include a pre-emption clause, giving the creditor first right to purchase the asset before sale.

VI. Mortgage vs Other Securities

Mortgages are real securities, while guarantees are personal obligations—often used in tandem to strengthen a lender’s position.

VII. Enforcement and Foreclosure Process

When a borrower defaults, the mortgagee must proceed via judicial foreclosure. Self-help or extrajudicial repossession is not permitted under Thai law.

Steps:

1. Court Filing: Lender files a lawsuit for enforcement.

2. Judgment: If the court finds in favor of the mortgagee, it issues a decree for sale.

3. Public Auction: Property is sold via court-supervised auction.

4. Proceeds Allocation: After deducting costs and taxes, balance is paid to the creditor.

5. Deficiency Claims: Lender may sue for any shortfall; borrower receives any surplus.

Typical duration: 1 to 3 years, depending on court backlog and borrower defenses.

A creditor cannot appropriate the mortgaged property directly, even with borrower consent (prohibited under CCC Section 725).

VIII. Rights and Duties of Parties

A. Mortgagor (Borrower)

• Retains possession and use of the property

• Must not damage or devalue the asset

• Can transfer the property, but subject to mortgage

• May prepay the loan unless contractually restricted

B. Mortgagee (Lender)

• May not interfere with borrower’s use

• Can initiate enforcement only upon default

• Must follow proper judicial process

• Has priority over unsecured creditors upon liquidation

Mortgage rights are transferable—lenders may assign mortgage interests, often used in securitization or portfolio transfers.

IX. Risks and Considerations

• Undisclosed encumbrances: Always conduct a land title search before registering or accepting a mortgage.

• Improper valuation: Overvaluation of the collateral can leave lenders exposed.

• Foreign enforcement: Mortgages involving offshore lenders must navigate both Thai and international law.

• Bankruptcy: Mortgaged property becomes part of the debtor’s estate but creditors retain secured status.

X. Conclusion

The mortgage system in Thailand is a legally robust but procedurally formal mechanism that underpins much of the country’s real estate financing. While Thai nationals can access mortgage credit relatively easily, foreign investors and lenders must navigate multiple layers of restriction, currency control, and land ownership laws.

The judicial nature of mortgage enforcement ensures strong protection for creditors but may involve lengthy timelines. Accordingly, careful contract drafting, proper registration, and legal due diligence are essential components in structuring secure, enforceable property-backed lending transactions in Thailand.