Using housing loans as a cash-management tool

Customers will not be charged the 2-per-cent fee normally charged for this type of payment.

The bank calls the package "Mortgage One".

Yuttachai Teyarachakul, executive vice president for consumer lending, said Mortgage One was designed to be a cash-management tool. With this mortgage package, once customers pay off debts in advance, they can save on interest costs. As they pay off debts in higher amounts than the usual monthly instalment, the bank will directly deduct the customers' outstanding principal balance by the surplus of payment.

In addition, if customers have an urgent need for money, they can withdraw the extra payment anytime.

"In our extensive market research, our findings show customers share similar concerns. They want to pay off their loans as quickly as possible, to relieve their interest burden. At the same time, they would also like to reserve some cash on hand in case of emergency. Therefore, the bank has developed this kind of home-loan product," said Yuttachai.

However, the mortgage rate for this product is slightly higher.

Mortgage One offers a floating interest rate in the first three years at the minimum housing rate (MHR) minus 2.25 per cent, or 4.9 per cent. From the fourth year onwards, the bank offers MHR minus 0.5 per cent, or 6.65 per cent.

The general home loan of Standard Chartered Bank (Thai) charges a fixed interest rate of 4.79 per cent for the first three years. After that, the bank offers MHR minus 0.75 per cent, or 6.4 per cent.

For example, if you borrow a Bt3-million housing loan at 4.79 per cent per year, you will have to pay Bt138,000 for the whole year. If you have also saved Bt1 million in a savings account that offers you 1.5-per-cent interest, you will receive a return of Bt17,000 per year. Therefore, the combined interest cost will be decreased to Bt120,000.

In comparison, if you put all of your savings of Bt1 million into the mortgage account, which charges 4.9-per-cent interest per year, your outstanding loan principal will drop to Bt2 million. Therefore, you will pay interest costs of only Bt94,000 for the whole year and save Bt26,000.

In addition, customers can access their surplus fund around the clock by withdrawing through an ATM, at a maximum of Bt100,000 per day, without withdrawal charges.

Yuttachai said the bank expected to lend Bt3 billion to 5 billion Mortgage One loans in the second half of the year, representing 40 per cent of this year's entire mortgage-loan target. This year, the bank expects to loan Bt15 billion, of which 40 per cent will be personal loans and 60 per cent mortgage loans.