When seeking capital against real estate assets in Thailand, property owners must navigate two distinct legal frameworks under the Civil and Commercial Code. While both serve as a means to secure funding, the legal "DNA" of each contract is fundamentally different.
1. The Fundamental Nature of the Agreements
A Mortgage is a security agreement. You are telling the lender, "If I don't pay you back, you have the right to sue me and take this house." Crucially, you remain the legal owner throughout the loan term.
In contrast, a Sale with Right of Redemption is a completed sale at the moment of registration. You are telling the buyer, "I am selling you this house today, but I have the legal right to buy it back from you at a fixed price within 2 years." Ownership transfers to the buyer on Day 1.
Technical Aspect | Mortgage (Jam-Nong) | Sale with Right of Redemption (Kai-Fak) |
Legal Definition | Security for the performance of an obligation. | A contract of sale with a redemption clause. |
Ownership (Title) | Remains with the Mortgagor. | Transfers to the Buyer (with redemption right noted). |
Possession Rights | Mortgagor retains full right of use. | Buyer owns it, but Seller usually stays by agreement. |
Foreclosure | Requires a court judgment and public auction. | Ownership becomes absolute if not redeemed by deadline. |
Interest Caps | Maximum 15% per annum. | Total "Benefit" capped at 15% per annum. |
2. Legal Safeguards and Risks
The risk profile for a Sale with Right of Redemption is significantly higher for the seller. Because the ownership has already transferred, if you miss the redemption deadline by even one day, the property is legally lost. There is no need for a court process or an auction. The buyer is already the owner; they simply keep it.
3. Choosing the Right Path
Mortgages are preferred for long-term stability. They are the standard for bank loans. They offer high legal protection but involve stricter credit checks and longer approval times.
Sale with Right of Redemption is often used in the private lending market. It is ideal for those who need high-liquidity funding quickly and have a guaranteed "exit strategy" (funds to buy back the property) within a short window.
