Lately, we received an email from Nong Min who is currently paying 10,000 baht (roughly US$318) for her monthly car payment. Nong Min would like to buy a house for herself but she is facing some difficulty to obtain a new home loan because the monthly car payment has taken up nearly 1/3 of her monthly income. At the same time, she doesn’t have much savings to pay the down payment for the house. She is seeking for some advices after reading one of our previous articles “Refinancing car loans into home loan”. Now here is some of the calculation we do for her.
In Thailand, if you are having one loan that has taken up 1/3 or more than 1/3 of your monthly income, you will have some difficulty in getting another loan. However, you can play a little trick in order to get both things you want at the same time as long as the income is stable and going to be stable for long.
- Monthly salary: 38,000 baht ($1200)
- Monthly car payment: 10,000 baht ($318)
- Remaining car loan: 240,000 baht (24 months)
- Current car value: 650,000 baht
- Savings: 50,000 baht
- House value: 1.6 million baht
- Down payment needed: 16,000 baht
Base on the current car market value, Nong Min can refinance her car and get 650,000 – 240,000 = 410,000 baht cash. She can pay 400,000 baht for the house down payment and save the 10,000 baht into her savings for emergency purposes. With 400,000 baht down payment, the bank is now considering giving her the credit. As for the car, it is easier to refinance at the maximum of 9 years. Now the refinance goes like this.
- New monthly car payment: 650,000 @ 3% @ 9 years = 7,643 baht
- House loan monthly payment: 1.2 million baht @ 5% @ 30 years = 6,450 baht
- Remaining savings: 60,000
Base on the new calculation above, Nong Min now has a total monthly payment at 14,093 baht, which is just slightly over 1/3 of her monthly income at the acceptable range. She can now own both house and car at the same time. In this case, the car loan should go as many years as you can because the interest rate is only 3% while the housing loan is 5%. Other than that, what you should be well prepared is a minimum of six months stable salary income statement, six months permanent address, as well as good credit scores.