5 Things You Need to Know Before Deciding to Take Out a Loan for a Second-Hand House

1. You won't get 100% financing for a second-hand house loan

When applying for a second-hand house loan, banks typically set the maximum loan amount at 80%-90% of the purchase price or appraised value. This is different from applying for a new house loan, where you can get 100% financing or even more for renovations. The loan amount also depends on the borrower's credit history and repayment ability.

Some banks may offer 100% financing based on the purchase price or appraised value, but they might limit the loan amount to a maximum of 3,000,000 baht or impose stricter requirements, such as a minimum income of 30,000 baht.

The bank's loan amount determination considers various factors, such as the depreciation of the house, location, and each bank's policy on second-hand mortgages. Therefore, when buying a second-hand house, it's advisable to set aside additional funds for the 10-20% difference that cannot be financed.

2. You cannot make a down payment on a second-hand house

Down payments typically occur with new houses, where the seller and buyer agree on a payment plan until the house or condo is completed and ready for transfer of ownership. This can take anywhere from 6 months to over a year, depending on the contract.

However, when purchasing a second-hand house, buyers cannot make a down payment. They must prepare a down payment of about 5-20% of the purchase price in advance.

3. Buying a second-hand house involves more steps

The process of applying for a second-hand house loan is more complex and time-consuming than applying for a new house loan. Before applying for a loan, the buyer and seller must negotiate and agree on a purchase agreement. The loan applicant must then obtain a copy of the land title deed from the seller and take the purchase agreement to apply for the second-hand house loan with the bank. After that, the bank will assess the seller's house value, check the borrower's qualifications, and consider approving the loan amount.

If the house is mortgaged with another bank, the seller must first redeem the mortgage with that bank so that the bank for the borrower can take over the mortgage.

During the transfer of ownership, the buyer, seller, and bank must complete the transfer at the land office on the same day so that the buyer can mortgage the house with the bank they applied for the loan with. This includes transferring the house registration and utility meters. Only then will the sale be considered complete.

4. Buyers and sellers should clearly agree on expenses

In addition to the house price, there are additional expenses that both the buyer and seller must share responsibility for. It is essential to agree on which expenses each party will cover or how they will be divided. The expenses include:

  • Transfer fee of 2% (can be shared as agreed)
  • Stamp duty of 0.5% or specific business tax of 3.3% (should be the seller's responsibility)
  • Withholding income tax according to the Revenue Department's regulations (should be the seller's responsibility)
  • Mortgage registration fee of 1% of the mortgaged value (should be the buyer's responsibility)

5. Prepare funds for repairs or renovations

Naturally, second-hand houses have been used and may have parts that are old or in need of repair. Buyers should set aside funds for repairs, improvements, extensions, or renovations because the loan amount for a second-hand house does not include repair and renovation costs.

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