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What is the difference between a sale with right of redemption and a mortgage?

What is the difference between a sale with right of redemption and a mortgage ?

What are the differences between ” sale with right of redemption ” and ” mortgage “?

Many people have heard of “sale with right of redemption” and “mortgage,” but only a few truly understand the difference, as some transactions and operations are very similar. Today, Pacharakrit Property Co., Ltd., a leading real estate investment consulting firm specializing in sale with right of redemption and mortgages, will help everyone understand and differentiate between the two. Let’s take a look.

What is a sale with right of redemption ?

A sale with a right of redemption is a transaction where your property is used as collateral for a loan. The property serves as security for the repayment of the debt and interest within a specified period. The property immediately becomes the property of the “buyer” from the date of the contract. If the property cannot be redeemed within the agreed period, it automatically transfers ownership without the need for a court case. Importantly, all such transactions must be conducted in the presence of an official at the Land Department.

The procedures and conditions for a sale with right of redemption are as follows:

1. The buyer (broker, investor, individual, legal entity, or other non-bank organization) will have the property appraised and valued. On average, the price will be approximately 40-70% of the appraised value.

2. The buyer in a deposit scheme must set an interest rate that does not exceed 15% per annum, as permitted by law.

3. Once the price has been agreed upon, an appointment must be made to finalize the sale and repurchase agreement with the land department.

4. At the Land Department, once a sale with right of redemption contract is made, registered, and all fees are paid, the seller receives the agreed-upon amount. The buyer immediately acquires ownership of the land.

5. The redemption period must be at least 1 year and no more than 10 years.

The fees for a sale with right of redemption at the Land Department are as follows:

1. Transfer fee for sale with right of redemption: 2% of the appraised value of the land or the sale price.

2. Specific business tax of 3.3% (for cases where ownership has been held for less than 5 years or the name has been on the household registration for less than 1 year).

3. Stamp duty 0.5% (in cases where specific business tax is not payable)

4. Income tax.

The fees for loan redemption at the Land Department are as follows:

1. Redemption fee: 50 baht per plot.

2. Stamp duty 0.5%

3. Income tax.

Note: If redeeming real estate from a sale with right of redemption , ** no specific business tax will be payable **.

What is a mortgage ?

A mortgage is essentially a sale with a right of redemption. It involves using your property as collateral for a loan, with the property serving as security for the repayment of the debt and interest within a specified period. The property remains yours, not the mortgagee’s. If the mortgagor defaults on the loan, the mortgagee can only file a lawsuit in court to claim damages; they cannot immediately seize the property or land.

The procedures and conditions for a mortgage are as follows:

1. Compare the interest rates of different places.

2. Prepare the documents for the loan application.

3. The collateral will be appraised by a professional appraisal company (this step involves negotiating with the mortgagee regarding the location and method of the appraisal).

4. Notification of approved loan amount and interest rate (upon approval).

5. Loan documents and mortgage agreements must be completed at the Land Department.

The fees for mortgage registration at the Land Department are as follows:

1. Mortgage registration application fee: 5 baht per plot.

2. Mortgage registration fee: 1% of the loan amount, but not exceeding 200,000 baht.

3. Stamp duty (For every 2,000 baht of mortgage fee, a stamp duty of 1 baht will be charged, but not exceeding 10,000 baht).

The fees for loan redemption at the Land Department are as follows:

1. There are only service fees and charges of 100-200 baht per plot.

Summarize the differences between a sale with right of redemption and a mortgage.

section	Sale with right of redemption	mortgage
fee	For registration, the seller must pay a fee at a rate of 2% of the appraised value. Withholding tax on income is calculated based on the land’s appraised value. A specific business tax of 3.3% will be applied to the appraised value of the land or the sale with right of redemption price, whichever is higher (applicable only to sales with right of redemption that meet the specified criteria). The stamp duty is 0.5% of the appraised value of the land or the sale with right of redemption price, whichever is higher. However, if the specific business tax has already been paid, the stamp duty will be waived.	For registration, the mortgagor must pay a fee at a rate of 1% of the mortgage amount.
Guarantee	In a conditional sale agreement, the seller is obligated to immediately transfer ownership of the property to the buyer.	The mortgagor is not required to transfer ownership of the property to the buyer under a conditional sale agreement.
Right to use property.	The seller has no right to use the property sold under a right of redemption until the entire property is redeemed.	The mortgagor has the right to continue using the property.
Redemption period	The redemption period for property begins from the time of the sale with right of redemption, as defined by law for both types of property. Real estate less than 10 years old. Movable property, not older than 3 years.	Mortgage laws do not specify a time limit in the contract; the mortgagor can repay the debt to the mortgagee until the full amount is paid.

So, from the information we’ve compiled, you can see that sale with right of redemption and mortgage have many similarities, but also many differences. Therefore, readers should carefully study the information before entering into any legal transaction. Having a consultant or expert to provide advice and guidance will make legal transactions smoother and easier to understand.

Pacharakrit Property Co., Ltd. is a leading real estate investment consulting firm specializing in property sales, mortgages, and loan applications. We are trusted by numerous organizations and individuals. If you are interested in having us be a part of your project, providing trusted advice and support, please contact us.

Note: The criteria for consideration are as determined by the company.

For more information, please inquire.

Tel: 02-096-2962

Line: @Pacharakrit.ppt or click https://lin.ee/xqcU1Y1

E-mail : Pacharakrit.property@gmail.com

Thank you for the information from: www.tb.co.th and www.landprothailand.com