What is the bag fee? Where does the money go before it reaches the title holder?
What is the bag fee? In the mortgage and sale-pledge industry, this term is often used to refer to money that is deducted or withheld from the transaction amount before the property owner receives the funds. However, it is not a legally recognized fee that can be automatically charged. It is necessary to check who receives the money, what it is withheld for, and whether it is a legitimate service fee or a benefit from lending that may constitute hidden interest.
For title holders, what matters is not just how many millions of baht are approved, but how much net money they actually receive, how much they need to repay, and whether they have a chance to retain their property.
Why does a landowner request 3 million baht but actually receive less than 3 million baht?
Imagine a business owner who has land valued at approximately 7 million baht and needs 3 million baht in capital to purchase goods and circulate the business.
The broker informs that there is an interested party willing to provide the funding, so the property owner begins preparing documents and planning to use the money.
But before the contract signing day, they receive details that the money will be deducted for bag fees, brokerage fees, document fees, and other expenses.
From the 3 million baht, only about 2.7 to 2.9 million baht may actually enter their account.
The problem is that the property owner has already planned to use the full amount of money.
If they receive insufficient funds, they may need to find additional money or postpone their purchase.
Additionally, if they have to repay a debt based on the 3 million baht while actually receiving less, the financial cost compared to the usable funds will increase.
A point to be cautious about is that certain types of deductions may be illegal, even if the property owner has signed consent.
What is the difference between bag fees, brokerage fees, interest, and actual fees?
These four terms have different meanings and legal implications.
Bag fee
is a term used in business, not a fee that is generally recognized by law.
In some cases, it may refer to a funding procurement fee, while in other cases, it may be additional money charged by the lender or related parties.
Changing the name of the money to a bag fee does not make the charge legal.
If the money is a return related to lending, it must be considered together with interest and laws prohibiting charging interest above the legal rate.
Brokerage fee
is compensation for facilitating or arranging a contract, and it must be considered according to the agreement and legal principles regarding brokers.
It should be clearly stated who hires whom, who pays, what the broker does, and when they receive compensation.
Brokerage fees that are correctly named still need to be verified against the actual transaction content, especially when involving lenders.
Mortgage interest
is the return from lending money secured by real estate.
For general loans under the Civil and Commercial Code, Section 654, there is a limitation on interest not exceeding 15% per year, considering specific laws and the lender's status.
It is prohibited to cite market rates as the legal rates allowed for all transactions.
Actual fees and expenses
such as registration fees for rights and legal acts, document copying fees, or appraisal fees that are actually provided.
It is necessary to check the items and rates used with the land office or related service providers.
Government fees are not money that brokers can arbitrarily set themselves.
Case study: Mortgage of 3 million baht but net received is 2,730,000 baht
Assuming the landowner wants to mortgage to raise 3 million baht.
The land has a hypothetical market value of 7 million baht and has no existing mortgage burden.
There is an offer for funding specifying several deductions.
The following table is an example of an offer that needs to be verified, not an example of terms that guarantee legality.
Item | Amount |
|---|---|
Proposed mortgage amount | 3,000,000 baht |
Bag fee 5% | −150,000 baht |
Brokerage fee 3% | −90,000 baht |
Document and hypothetical expenses | −30,000 baht |
Net amount received by the property owner | 2,730,000 baht |
Difference from the proposed amount | 270,000 baht |
LTV from property value of 7 million baht | 42.86% |
The calculation is as follows:
3,000,000 − 150,000 − 90,000 − 30,000 = 2,730,000 baht
The property owner receives 91% of the stated amount and has 9% deducted.
This figure shows the difference between the contracted amount and the net amount only; it does not yet calculate the legally enforceable debt burden.
If the deducted money is a hidden lending compensation, enforcing repayment under such conditions may have legal issues.
If interest is calculated at 12% per year, how high is the actual cost?
To illustrate the economic impact, let's assume that the property owner must pay interest according to the offer of 12% per year and repay the principal in full after 12 months.
Item | Amount |
|---|---|
Net received amount | 2,730,000 Baht |
Interest as proposed 12% of 3 million Baht | 360,000 Baht |
Average monthly interest | 30,000 Baht |
Principal amount to be returned after one year | 3,000,000 Baht |
Total principal and interest as proposed | 3,360,000 Baht |
Difference from net received amount | 630,000 Baht |
If the difference of 630,000 Baht is compared to the actual amount received of 2,730,000 Baht, it will equal approximately 23.08% for a period of 12 months
The figure 23.08% is merely a simple cost rate from hypothetical cash flow, not a legal interest rate diagnosis or a return rate calculated by IRR method
And it does not mean that every expense in the table must automatically be considered as interest
But it is an important signal that this condition needs to be reviewed by an expert before the transaction, as there may be issues regarding excessive interest claims
Property owners should not decide based solely on the term '12% interest' without knowing the total costs and net amount
How much does the bag fee of 3%, 5%, and 10% reduce the money?
If we assume to deduct only the bag fee, excluding other items, the impact will be as follows
Credit limit | Deduct 3% | Deduct 5% | Deduct 10% |
|---|---|---|---|
1 million Baht | 30,000 | 50,000 | 100,000 |
3 million Baht | 90,000 | 150,000 | 300,000 |
5 million Baht | 150,000 | 250,000 | 500,000 |
10 million Baht | 300,000 | 500,000 | 1,000,000 |
These figures are calculations for comparison of impacts only, not rates recommended for collection
For property owners needing 5 million Baht, a 10% deduction means a reduction of 500,000 Baht before actual use
This amount may equate to several months of working capital for a small business
Brokers should explain the net amount figures straightforwardly, not just mention the limit offered by investors
Why do some deals have multiple layers of costs?
Some transactions have more than one broker
The first may receive information from the property owner, the second helps find the funder, and the third coordinates documents or appointments
Collaboration is not wrong in itself
But problems arise when each one charges additional fees from the property owner without clear agreements
For example, if each broker wants 1% of the 3 million Baht limit
If there are three people and they calculate separately, it will equal 90,000 Baht
But if they agree on a total compensation of 1% and then share it internally, the total compensation will only be 30,000 Baht
The difference lies in the structure of the agreement, not just the number of people
However, each type of compensation still needs to be checked for legal compliance and the nature of the actual work
Agreeing to share compensation among themselves does not make illegal fees legal
What should property owners ask when there are bag fees deducted?
The first thing is to ask what the deducted money is for
If it is for services, they should ask what the service is, who provides it, and what evidence there is
If it is for brokerage fees, they should ask who hired the broker and when the compensation was agreed upon
If it is for government fees, they should request to see the rates and supporting documents
If it is additional money charged by the lender, they should consider whether it relates to the return from lending
Property owners should receive documents showing the total amounts before signing, including contract amounts, actual payments, each expense, due dates, and repayment obligations
If the other party refuses to disclose the net amount items, they should delay the transaction until verification can be made
How should a good broker prevent bag fee issues?
Brokers are intermediaries who have the opportunity to help property owners and investors understand the terms clearly
An important duty is not to make information about expenses ambiguous
They should prepare a net amount table and send it for all parties to review before scheduling registration
They should not tell the property owner that they received 3 million Baht if they already know that the actual amount received is only 2.7 million Baht
They should not guarantee that any bag fee is legal just because it has been charged in the market before
Brokers who want to build long-term trust should disclose their roles and have experts review the risky conditions
For those interested in the role of brokers, more information can be studied from the broker page of PK HOME INVEST
Investors should view bag fees in what way?
Investors looking for sustainable investments should not only focus on the returns received on the first day.
If the property owner receives less net money than actually needed, it may lead to business plan failure and increase the risk of debt repayment.
For example, a business owner needs 3 million baht to purchase raw materials but only receives 2.73 million baht.
If the raw materials cannot be purchased as planned, the expected income may decrease.
When income decreases, the ability to pay interest and repay the principal may also decline.
Therefore, money that is excessively deducted may not benefit the investor in the long run.
Investors should check that all types of expenses have justifiable reasons and do not evade legal limitations.
Good risk management should start from actual debt repayment ability, not just hope that there is sufficient collateral.
Those interested in this issue can read the article, 'Mortgaging Land Without a Salary Slip: What You Need to Know,' to understand that the value of land cannot fully substitute for a debt repayment plan. What should be particularly cautious about in the mouthpiece fee in a sale and leaseback transaction? Sale and leaseback differs significantly from a mortgage.
A mortgage involves using property as collateral while ownership remains with the mortgagor.
In contrast, a sale and leaseback involves transferring ownership to the buyer from the time of registration, with the seller having the right to redeem under the law.
Therefore, if the property owner receives less than the full amount in a sale and leaseback transaction, both the sale price stated in the contract and the actual payment, redemption money, and related expenses must be checked.
The concept of loan interest should not be directly applied to sale and leaseback without verifying specific laws, especially for agricultural land or residential land under the Act on Protection of the People in Sale and Leaseback Contracts for Agricultural Land or Residential Land, B.E. 2562, which has provisions protecting sellers and redemption issues.
Additional mouthpiece fees may affect the consideration of whether the actual payment and specified returns comply with the law.
It is advisable to have a lawyer review the documents before registration and inquire with the land office about the procedures used with that property.
The Land Department has published the 'Act on Sale and Leaseback of Agricultural Land or Residential Land, B.E. 2562' and related regulations for study.
Why might advance deductions become a legal issue?
Assuming the loan contract states a principal of 3 million baht, but the borrower actually receives less due to deductions as returns for the lender.
Even if the documents use terms like 'operating fees' or 'mouthpiece fees,' the court may need to consider the intent and facts of the transaction, not just the item names. The Supreme Court ruling No. 882/2566 reflects that proving the actual interest charged, even if different from the wording in the documents, is crucial in assessing the completeness of the debt. Thus, it should not be concluded that merely having the borrower's signature makes all types of deductions legal.
Both property owners, brokers, and investors should avoid structuring expenses to obscure the returns from lending.
Before mortgaging or selling and leasing back, how should one request a net cash flow statement?
Good documents should show the amounts according to the contract, the actual payments, the recipients of each payment, and the reasons for the charges.
It should display the principal or redemption amount according to the type of transaction, along with payment or redemption terms.
Government fees should be separated from private compensation.
If there are multiple brokers, the total compensation should be clearly stated.
If there are items with unknown amounts, it should be indicated as an estimate, not presented as a confirmed amount.
Creating a preliminary table helps the property owner know whether there will be sufficient funds and assists the investor in checking the reasonableness of the transaction.
If the property owner is still unsure whether to use a mortgage or a sale and leaseback, they can read 'How Mortgages and Sale and Leasebacks Differ' to understand the implications for ownership before making a decision.
If one refuses to pay the mouthpiece fee, will the transaction not be able to proceed?
There is no single answer for every case, as it must be checked what the expense is.
If it is a fee that must be paid according to the law, it must be carried out according to the requirements.
If it is a service fee agreed upon correctly, the rights and obligations under the contract must be considered.
However, if it is money charged without justification or may fall under illegal lending returns, the property owner should not rush to pay simply because they are pressured that the deal will fall through. They should request written details and consult experts. If transparent conditions cannot be agreed upon, not proceeding with the transaction may be a safer option than receiving money with obligations that are not understood.
In summary: Net cash is more important than the advertised loan amount.
The mouthpiece fee is a term that all parties in the mortgage and sale and leaseback industry should understand, but it should not be accepted without verification.
Property owners must know how much they actually receive and whether they have enough money for their purposes.
Brokers must disclose compensation and not increase costs without value or supporting agreements.
Investors must check the legality and impact of expenses on debt repayment ability.
A fair deal is not one without expenses, but one where all expenses are justifiable, verifiable, and compliant with the law.
Follow more informative articles at or inquire through PK HOME INVEST contact channels, ensuring to check the actual conditions before submitting property documents or personal information.
Frequently Asked Questions: 1. Is the mouthpiece fee for mortgages or sale and leasebacks illegal? It cannot be judged solely by the name; one must look at the recipient, purpose, and nature of the transaction. If it is hidden interest or used to evade legal restrictions, there may be legal issues. 2. Is a 5% mouthpiece fee a rate permitted by law?
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คำถามที่พบบ่อย
1. ค่าปากถุงจำนองหรือขายฝากผิดกฎหมายหรือไม่?
ไม่สามารถตัดสินจากชื่อเรียกเพียงอย่างเดียว ต้องดูผู้รับเงิน วัตถุประสงค์ และลักษณะธุรกรรม หากเป็นดอกเบี้ยแฝงหรือใช้หลีกเลี่ยงข้อจำกัดกฎหมาย อาจมีปัญหาทางกฎหมาย
2. ค่าปากถุง 5% เป็นอัตราที่กฎหมายอนุญาตหรือไม่?
No, there is no general principle that a 5% bag fee is legally acceptable for every deal. This figure is merely an example that must be verified according to the facts.
3. If the mortgage is 3 million baht but the actual amount received is 2.7 million baht, how much principal needs to be returned?
It is necessary to review the contract, the actual payment made, and the legality of the deductions. One should not automatically conclude that the return must be according to the specified amount or only the net amount without verifying the facts.
4. If a sale is subject to a bag fee deduction, what should be done?
Request written details of the actual payments, the sale price, the redemption amount, and all expenses. Check the applicable laws regarding the property and consult a lawyer or land office before registration.
