Property Mortgages in Thailand

Property mortgages in Thailand is a routine way for banks and private lenders to secure loans, but it operates inside a distinctive legal and administrative framework. The fundamentals are familiar — a borrower grants a security interest over real estate to secure repayment — yet the devil is in the details: title class, correct Land Department registration, lender drafting, enforceability mechanics and special rules that apply to foreigners, leaseholds and non-chanote titles. This guide explains how Thai property mortgages work in practice, what lenders require, how enforcement proceeds, tax and cost implications, and practical closing and risk controls.

Legal nature and why registration matters

A mortgage in Thailand is a real right registered against the land title at the local Land Office. Registration is decisive: an unregistered security is weak or ineffective against third parties. Once registered, the mortgage creates public notice and priority over later creditors. The date and time of registration determine ranking among competing claims. For lenders and buyers, the lesson is simple — never fund on an unregistered mortgage without contractual and escrow protections.

Which title classes are mortgageable

Not all titles are equal:

• Chanote (Nor Sor 4 Jor) — the preferred, survey-backed title. Chanote is the bankable gold standard and accepted widely as collateral.

• Nor Sor 3 Gor / Nor Sor 3 — quasi-title forms reflecting long possession. Banks accept them only cautiously; many require conversion plans, sponsor guarantees or extra security.

• Sor Kor 1 / possession certificates — weakest class; lenders rarely accept these without substantial additional guarantees.

• Registered leaseholds, usufructs and superficies — these real rights may be used as collateral if registered and acceptable to the lender, but they attract lower loan-to-value (LTV) ratios and stricter conditions.

• Condominium units — technically fee simple for the unit and widely acceptable for lending, subject to condominium quota and corporate housekeeping.

If you intend to use a property as collateral, verify title class early and test lender appetite before spending on surveys or legal opinions.

Typical mortgage documents and party roles

A standard mortgage package in Thailand includes:

1. Mortgage deed: the primary document to be registered at the Land Office. It must precisely identify the title number, mortgagor, mortgagee, secured amount and remedies.

2. Loan agreement: commercial terms — interest, schedules, covenants and events of default.

3. Promissory note(s) and guarantees: evidencing the debt and extra security.

4. Power of attorney: limited powers may be granted to register, discharge, or, where allowed, facilitate enforcement.

5. Insurance assignment: insurer naming the lender as loss payee or requiring lender consent on claims.

6. Subordination or consent from third parties: where the property carries usufructs, leases or nominee arrangements, lender-required consents are included.

All original documents must be presented for Land Department registration; lenders will not release funds on the basis of photocopies alone.

Due diligence and lender prerequisites

Thai banks and institutional lenders run a structured checklist:

• Title search and chain tracing: certified Land Department extracts and a retrospective chain of title to identify prior encumbrances or suspicious transfers.

• Surveyor’s tie-in: a licensed surveyor ties the register plan to physical boundary markers and reports encroachments or inconsistencies.

• Corporate and UBO checks: if the mortgagor is a company, DBD extracts, shareholder registers and corporate authorizations are mandatory.

• Environmental, zoning and planning checks for development collateral.

• Insurance: adequate replacement and liability cover with the lender as loss payee.

• Legal opinion: Thai counsel confirming enforceability, priority and usual registration mechanics.

Lenders will often insist on a minimum remaining term for registered rights (for example, for leasehold collateral a lender may require 10–15 years remaining after the loan tenor).

Valuation, LTV and risk pricing

Loan-to-value ratios vary by asset class and title quality. Chanote residential properties typically command highest LTV (often 60–80% depending on borrower profile); non-chanote, leasehold or off-plan property attracts substantially lower LTV and higher interest rates. Lenders discount expected recovery values for suspected conversion risk, encroachment likelihood and marketability in enforcement. Honest valuation inputs and independent appraisals are therefore pivotal to pricing.

Enforcement and foreclosure mechanics

Thailand’s enforcement process is judicial:

1. Default prompts acceleration per the loan documents.

2. Court proceedings or execution: the lender applies for a judgment or files an execution action with the court/Department of Legal Execution.

3. Public auction: enforced sale of the mortgaged property at public auction with proceeds applied to secured debt.

4. Deficiency claims: lenders may seek amounts outstanding if auction proceeds are insufficient, subject to creditor priority and legal costs.

Because enforcement is public and can take time, prudent lenders include step-in rights, reservation of title for fixtures, and undertakings from sponsors or guarantors. If the borrower is foreign or the asset is held indirectly (via a Thai company), enforcement often requires extra procedural steps that increase recovery uncertainty.

Special issues for foreigners

Foreigners face three recurrent mortgage issues:

• Ownership limits: foreigners generally cannot own freehold land. Lenders therefore prefer condominium units, registered long leases, superficies, or security over corporate shares. Each structure has different enforceability and tax outcomes.

• Nominee risks: arrangements where Thai persons hold title as nominees are risky and often unwound in disputes; lenders avoid relying solely on nominee assurances.

• Cross-border enforcement: if assets or guarantors are abroad, lenders should secure collateral in Thailand and consider additional onshore sponsor guarantees or escrow arrangements.

Banks typically require Thai guarantors or local corporate borrowers for land-backed loans to avoid ownership barriers.

Costs, taxes and discharge procedures

Expect several fees:

• Mortgage registration fee: a nominal Land Department fee (based on a percentage scale or fixed rate depending on instrument).

• Stamp duties and documentary taxes: vary by transaction type and recorded amount.

• Legal, surveyor and valuation fees: due diligence costs borne by borrower or as negotiated.

• Discharge costs: when repaid, the mortgagee must execute a discharge deed and register deletion; obtain the updated certified extract as proof of release.

Allocate budget for these items at closing and confirm who bears each cost in the loan agreement.

Practical risk controls for lenders and borrowers

For lenders:

• insist on original chanote where possible;

• require surveyor tie-in and immediate registration;

• use conservative LTVs on non-chanote assets and obtain sponsor guarantees.

For borrowers:

• ensure precise title references in mortgage deeds;

• secure clear corporate authorizations if selling entities are involved;

• negotiate reasonable cure periods and sale mechanics that avoid punitive auction processes.

Closing checklist — what must be completed before funds are released

1. original title deed and certified Land Department extract;

2. licensed surveyor’s tie-in report;

3. signed mortgage deed and loan documents;

4. proof of insurance with lender as loss payee;

5. corporate minutes and DBD extracts if applicable;

6. registration receipt showing mortgage annotation or escrow instructions for staged registration;

7. updated certified extract delivered to lender post-registration.