There’s no earning property gives you a unique sense of security. In fact, property investment is one of the things that most people aspire to, and it’s one of the first things most people do. Which is why if you’re contemplating a move to a different country, you might be worried about how you would go about investing in property there.
If a move to Turkey is on your radar, you might be wondering how you would go about getting a mortgage in Turkey. Or even just how the Turkish property finance market works. Maybe you want to purchase a rental property or invest in a vacation home so you can split your time between your home country and the Turkish coast.
There are many reasons you might want to know more about financing property in Turkey. So, we’ve put together a guide on everything you need to know about mortgages in Turkey, how to get one, what determines the maximum you can borrow, and more. read on to find out everything you need to know about purchasing property with a mortgage in Turkey.
Mortgage in Turkey
Like most countries, purchasing property outright in Turkey is out of reach for most people. Even those who do have the cash reserves to do this, understand that financing their property and keeping their cash liquid, is a better way to structure the deal.
This means that just like every other country there are several ways you can finance a property purchase in Turkey so let’s take a look at what they are and how they work.
Mortgage Types in Turkey
In Turkey there are two types of mortgages: the limit mortgage and the principal mortgage.
A principal mortgage is the type of mortgage that we’re all familiar with, where there is a fixed amount agreed to by the lender and the person seeking the mortgage. A limit mortgage is a type of mortgage where the upper limit of the transaction (which might not be known) when the mortgages originated is financed.
in most cases if you are purchasing property in Turkey, you will have a principal mortgage.
Maximum Loan to Value Percentage
The maximum loan to value percentage available to foreigners who want to purchase property in Turkey is 70%. Which means if you are seeking a mortgage in Turkey for a property that costs $100,000, you would be eligible for up to $70,000 of that amount.
It is also worth noting but most Turkish banks and finance institutions will not consider a mortgage that is less than about $65,000 to $75,000, Particularly when dealing with foreigners. This is understandable as they have to ensure that it is financially worth their time.
Minimum Down Payment for Mortgages in Turkey
The minimum down payment for mortgages in Turkey is typically higher than most Western countries. In general, you will be required to have between 30 and 35% of the value of the property you wish to purchase as a down payment.
Which means you will need to take a close look at your cash reserves before you start looking at properties to purchase. Make sure you factor this cost into your affordability calculations. The last thing you want is to find the perfect property in Turkey only to find that you don’t qualify for a mortgage because you don’t have enough of a down payment.
What Is the Interest Rate of Mortgage in Turkey?
Like most countries, interest rates in Turkey fluctuate from year to year. They can be wild swings in the percentage of interest from year to year. In 2020, the interest rate for a mortgage in Turkey was 12.5%. But it has been as much as nearly 20% over the last 10 to 15 years.
So, make sure you factor potential interest rate changes to your affordability calculations too.
What Is the Longest Mortgage Term in Turkey?
Mortgage repayment terms in Turkey can vary greatly depending on who you’re dealing with. Some developers that finance their properties directly, set their mortgage terms at five years.
Most banks offer longer mortgage terms, but the maximum mortgage term in Turkey is 20 years. Most banks, even those that are friendly to foreigners seeking a Turkish mortgage, will not give you the maximum term for your loan. So, you should be prepared for a mortgage term that is in the region of 10 to 15 years.
The shortest mortgage term in Turkey is three years.
What Are the Minimum Mortgage Eligibility Criteria in Turkey?
Each bank and finance institution in Turkey will, of course review your credit history in great detail. You must also be able to prove that you have the means or the income to repay the mortgage as per the terms of the contract.
However, it’s also important to note that there is an age limit on applying for a mortgage in Turkey. If you are older than 70, you will not be able to apply for a new mortgage in Turkey.
Do I Have to Apply for a Mortgage in Turkish Lira?
It’s no secret that Turkish Lira have experienced some big fluctuations in recent years. So, you might be a bit wary of committing to a mortgage contract in the local currency. The good news is that most banks and mortgage finance houses will consider mortgages in GBP, USD, or EUR, among currencies. So, you do have the option to insulate yourself by getting a mortgage in your home currency.
How to Apply for a Mortgage in Turkey ?
As with any mortgage in any country, if you want to apply for a mortgage in Turkey, you will need to have a good credit rating.
There are also as you would imagine and large number of documents that are required to complete this kind of transaction.
Some of the documentation you might be asked to provide when applying for a mortgage in Turkey include:
- Proof of earnings such as payslips or bank statements
- Personal income tax documents
- A valid passport
- Proof of residency in Turkey if you are already a resident in Turkey
- Tax documentation if you’re a tax resident in Turkey
Additional documentation may also be required depending on the bank or finance organization you are dealing with, And your status in Turkey.
The process for applying for a mortgage in Turkey as a foreigner, is usually as follows:
- Determine your budge and affordability
- Approach a mortgage broker or bank in Turkey
- Get a Turkish tax number if you don’t already have one
- Verify the TAPU with the Land Registry, and apply to the Land Registry to sign the contract
- Complete and sign the contract
- Pay the deposit or down payment
- Complete the mortgage application with the bank or broker
- Wait for the title deed to be prepared
- When the TAPU is finalized, pay for your property and all related taxes
Just like any country purchasing a property with a mortgage in Turkey can be a long and drawn-out process. You will probably be asked for a lot of information along the way, and there’s a lot of paperwork to be completed. However, the good news is if you meet the minimum requirements for a mortgage in Turkey, and you can provide all the documentation requested, it is very possible to buy a property with a mortgage in Turkey as a foreigner.
Banks That Give Mortgages in Turkey
Most banks in Turkey do offer mortgages, but many do not offer them to foreigners. So, you have limited options when it comes to approaching banks and finance institutions in Turkey.
Many people who want to buy a property in Turkey, and who require a mortgage, will approach the Turkish branch of an international bank like HSBC. Another option is to apply directly to a Turkish bank that will finance mortgages to foreigners. These include:
Be sure to consider all the options though because just like any bank in your home country, you might get a better deal from one or the other.
Fees
Turkey has recently announced some changes to mortgage fees and interest to encourage home purchases. However, these fee reductions do not apply to foreigners.
As we have already mentioned the interest rates for Turkish mortgages are fairly high. these do vary according to the currency that applies to your mortgage. So be sure to check what they will be when you apply. However, just like any country, these are not the only fees that will apply when you purchase property in Turkey. In addition to interest annual regular repayments, you can expect to pay:
- Stamp duty which is usually 4% of the purchase price
- Fees to hire a real estate attorney in Turkey, which can cost between 1000 and 1500 euros
- An agency fee which is usually around 3% of the property value
Turkish Property VAT Exemption
While we’re on the topic of fees it’s worth noting that foreigners who purchased their first property in Turkey are eligible for a VAT exemption. This applies provided the property is purchased in foreign currency, and that it is not resold within 12 months of the purchase date.
Mortgage Eligibility and Requirements
Applying for a mortgage in any country is a long and detailed process. The bank or finance company that will be lending you the money to purchase the property, will want to know who you are and to make sure that you can afford to repay the loan.
If you are planning to purchase property in Turkey, and you need to get a mortgage in Turkey to do so, it’s a good idea to have some of the paperwork ready when you apply. There is always a chance that the mortgage company you are dealing with will ask for additional information, but you can get the ball rolling by having the basic requirements ready to go.
Affordability Tests
The value of mortgage financing you will qualify for in Turkey is directly linked to your earnings. So, you will only be able to borrow as much as Turkish banks deem to be affordable based on your income. Which is why it’s a good idea to find out what you might qualify for before you start your house hunt. The last thing you want is to fall in love with a property that is outside of your range of affordability!
Can Expats Get Mortgage in Turkey?
The simple answer is yes. Provided you are a registered taxpayer in Turkey, any meet the minimum mortgage application requirements, you can get a mortgage as a foreigner in Turkey. However, you will probably not have access to the same deals and options that a Turkish citizen would have, and it’s likely that your mortgage term will be significantly shorter in the maximum period allowed.
While this can be an inconvenience, it is understandable that Turkish banks and finance institutions choose to protect themselves this way.
Document Checklist for Mortgage in Turkey
As we’ve already stated, there is a long list of paperwork and documentation that you will be required to present when you apply for a mortgage in Turkey. As a foreigner this list is longer than a local might be asked to provide, and includes:
- A notarized copy of your passport, with a Turkish translation
- Bank or financial statements that prove your solvency and the value of your assets – be prepared to offer these statements for six months to a year on request
- Proof of address – whether you are a resident in Turkey or provide a home address in your home country you will need to prove where you live. usually this will mean providing a recent utility bill or another official document.
- A Turkish tax ID which is available free of charge
- The TAPU for the property
- Proof of any other assets you own in Turkeyv
- Additional proof of income outside of your paycheck which might include retirement benefits, investment interest, alimony, or any other non employment income
the more information documentation and backup you can provide to the Turkish bank you have approached for a mortgage, the faster the process is likely to be, and the better the outcome.
Mortgage Brokers in Turkey
Working with a Turkish mortgage broker instead of directly with the bank, might be a simpler way to approach the process.
A reputable Turkish mortgage broker will be able to advise you on all of your options, as well as what you might be able to afford based on your income, assets and other factors. It is very important however to do your due diligence before you hire any of these brokers to work on your Turkish home purchase. Just like any other country, Turkey does have a fair number of scammers and fraudsters, that often take advantage of foreign buyers.
FAQ
How much do homes cost in Turkey?
In 2020 the average price for a home in Turkey was 455 U.S. dollars per square meter. Bear in mind that the average home size is somewhere between 100 and 200 square meters. Which means that you would probably be looking at somewhere between 45,000 U.S. dollars and 90,000 U.S. dollars for the average home. It’s also worth noting that property prices vary enormously by the city, town, or region you hope to buy in.
What language will my mortgage contract be in?
You will receive your mortgage contract in your native language. But like any legal document you should take care to read through it carefully before you sign. Ask questions about any clauses that don’t make sense and ask for amendments when something is incorrect.
Will I pay capital gains tax in Turkey?
Yes. If and when you sell the property you have purchased in Turkey, you will pay tax on the profits from the sale – however, gains of under 6,000 Turkish Lira are currently exempt from this kind of tax.
Will I pay property tax in Turkey?
Yes. When you are calculating how much you can afford to spend on property in Turkey, be sure to factor property taxes in. These are relatively low though, with large Turkish cities charging 0.2% of the assessed value, and surrounding areas 0.1%.
