Principal, in real estate, refers to the amount borrowed or the remaining part of the loan that the borrower needs to repay. This concept is distinct from interest, which is the cost of borrowing the principal amount.
Interest calculations vary, while the principal amount represents the actual property value or purchase price.
Principal is different from interest and fees because it directly relates to the real estate’s purchase price. Interest and fees, such as service charges and insurance, are additional costs not tied to the property’s value.
Principal reduction results in equity gain, whereas interest payments do not contribute to property ownership.
Principal features popular in Bangkok’s real estate for foreigners include flexible repayment options, where banks offer varying loan structures; competitive interest rates, with some banks targeting foreign investors with lower rates; and loan-to-value ratios, with higher ratios available for luxury properties. These features attract investors seeking favorable financing conditions.
Common principal features encompass down payments, typically 20-30% of the property price; amortization schedules, outlining how the loan is repaid over time; and refinance opportunities, allowing borrowers to negotiate better loan terms. These features are standard across many markets, ensuring buyers understand the financing process.
Unusual principal features in Bangkok’s real estate market include foreign quota restrictions, limiting foreign ownership in condominiums to 49% of the total space; leasehold options for land, offering ownership for a maximum of 30 years with renewal options; and collective investment schemes, allowing foreigners to invest in property through legal entities. These features cater to specific investor needs in a regulated environment.
Unique principal features for foreigners investing in Bangkok include the Thailand Board of Investment promotions, offering tax incentives for significant investments; Special Economic Zones, providing benefits for investments in designated areas; and the Elite Visa program, which offers long-term residency options for substantial real estate investments. These incentives make Bangkok particularly attractive to foreign investors.
The principal in Bangkok’s real estate market offers distinct advantages through government incentives and flexible financing options not commonly found in other markets. While down payments and loan-to-value ratios are common across markets, Bangkok’s unique features, like the Elite Visa program, differentiate it from similar investment opportunities.
For further insights into real estate terms and financing options, visit our glossary about Bangkok real estate.