My husband and I are both employees with a monthly family income of about 90,000 baht. We pay a housing loan of 20,000 baht per month, and we dare only invest about 15,000 baht monthly in an LTF, which we have been doing since 2008. Could you suggest how to manage our income better for financing the education of my children, aged 12 and 7? My husband has only five years before retiring, while I still have 14 years.
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA:You are more or less on the right track. A total debt service ratio of about 22% (20,000 of 90,000 baht) is still manageable. The next step is to prioritise your goals. Retirement savings and paying down mortgages should be the top two. College funding for the two children can come next. Let's not forget that you can get a loan for anything these days - home, education, cars, etc - but not for retirement.
With your time horizons until retirement, you need to take full advantage of all the tax-deductible mutual funds such as LTFs and retirement mutual funds (RMFs). If you are provided with a company-sponsored provident fund, I would take full advantage of that too. Enquire about "employee investment choice" and aim for a growth-oriented portfolio.
I plan to retire in either Bangkok or Hua Hin. Recently I have visited many projects in locations I like, but the prices were shocking. They were far higher than three years ago when I moved out here. Some friends suggested I wait for a year or so for the property bubble to burst, while others said buy now before the prices rise even higher. What should I do?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA: It all depends on your lifestyle. Bangkok has its pluses and minuses. Hua Hin, on the other hand, is much more laid back, which is more ideal for retirees. The purchase price of my Hua Hin condo was 35,000 baht per square metre but this was pre-1997. Admittedly, prices have gone up since then and monthly maintenance fees have also gone up.
When buying big-ticket items like a retirement home, you need to decide on several factors: your overall budget including maintenance fees, floor space, access to hospitals in case of emergency, cost of living, etc. Once you have decided on what you can afford, then you can shop around for the right property.
Prices in Hua Hin will never be cheap because it has always been the premier holiday/retirement destination for the well-heeled since the days of King Rama VII. In a way, when buying a property in Hua Hin, you are not only paying for the cost of the property itself but you are also paying for the lifestyle, i.e. the privilege of rubbing shoulders with the "right" crowd when going for a walk on the beach, if you get my drift.
Another alternative you may want to look at is a long-term lease. The average occupancy rate of my condo is only 20% throughout the year, and this counts New Year, Songkran and other holidays. The reason for such a low rate is that tenants have multiple holiday homes, with Khao Yai being another favourite destination. As a result, a long-term lease in these older but well-maintained properties might be worth exploring because these people are hardly there. You may even pick up a few good bargains along the way.
I need 1 million baht in cash urgently, and I have a house I live in with six more years of payments until I own it. Can I get a loan from my equity in the house? If so, how? Or should I get a personal loan? I think this would be similar to a loan shark given such a high interest rate!
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA: You have two options for a mortgage loan. First, go to your mortgage bank and seek a new valuation of the property (assuming there has been some increase since your mortgage took effect) and get a cash-out amount of the increase in the value. Note there will be some cost in the re-registration fee of the property, which is 1% and usually borne by the borrower.
Second, assuming you have paid your mortgage for at least three years (or else you will face a penalty fee for early breaking of the mortgage), you can seek to refinance the current loan amount with another bank. And if the property value has increased from the original date, you can seek the cash-out amount (an additional loan amount but in cash back to the borrower from the first day of the loan) for the additional value.
Another option is a personal or instalment loan. Admittedly, the interest rates are high at around 28% per year, but if your credit score is clean some banks may reduce the rate to 19-20% depending on the amount and term.
An instalment loan is not the same as a loan shark even though the interest rates are high. Paying by instalments, which can last as long as 48 months, will allow you more room to manage your finances. But if you are late on your payments or unable to pay a loan shark, they will send someone to break your kneecaps.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through firstname.lastname@example.org or the TFPA webboard, http://www.tfpa.or.th
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Writer: THAI FINANCIAL PLANNERS ASSOCIATION