2020 has become the year of the mortgage boom in Turkey. The country's authorities cut interest rates to the lowest level ever to save the economy in the face of the coronavirus pandemic. The all-time-low interest rates have led to record-breaking home sales. In total, from January to October 2020, the number of mortgage transactions in Turkey increased by 124.2 percent on an annualized basis and amounted to 534,246 units or almost €10 billion. Turk.Estate have prepared the answers to the most frequent questions concerning how to get a mortgage in Turkey if you are a foreigner.
Under what conditions will Turkish banks issue mortgages to foreigners in 2021? Will I be able to get a loan in a foreign currency?
Both private and state banks in Turkey have a friendly mortgage policy towards foreigners. To get a mortgage in Turkey in 2021, you will have to provide a minimum list of required papers. Banks usually process a mortgage application within three-five days and the mortgage term may vary from seven to fifteen years (with an option of early repayment with minimal penalties). EU residents can get a mortgage that will cover up to 80% of the property value. The size of a mortgage loan for nationals of other countries such as Russia, Ukraine and Kazakhstan varies from 30% to 50% of the cost of an apartment in Turkey. You can apply for a mortgage in Turkey if you are aged 21 to 65 years. Loans are issued in euros, dollars, Turkish liras, British pounds and Russian roubles. The maximum size of a mortgage loan depends on the conditions of a particular bank. The average threshold is €250,000.
Can foreign nationals participate in the mortgage campaign and get a loan with the lowest interest rates?
Unfortunately, they cannot. The 2020 Turkish mortgage campaign was launched exclusively for the Turkish residents, in an attempt to support the country's economy shaken by the coronavirus pandemic. Mortgage rates at the start of the campaign were 0.64% for new apartments in Turkey and 0.72% for resale units. Now the rates have increased and continue to grow from month to month. The current minimum mortgage rates for foreign applicants are:
- 5.75 percent for mortgages in euros;
- 6.28 percent for mortgages in dollars;
- 18-20 percent for mortgages in Turkish lira;
- 18 percent for mortgages in Russian roubles.
Interest rates may also vary slightly depending on the term for which a foreigner gets a mortgage in Turkey. Mortgage loans are issued to foreigners by both state and private banks. We recommend that you consider the mortgage offers of several banks before applying for a loan (in order to choose the most profitable one) and only then make a choice.
What documents will be required for foreigners to apply for a mortgage in Turkey in 2021?
The set of required papers for both private and state banks in Turkey includes:
- the applicant's passport and its photocopy with a notarized Turkish translation;
- a document confirming the applicant's solvency. It can be an extract from the bank on the movement of funds on the current account for six months or a year. It can also be a certificate of income or financial statements for entrepreneurs for the last 6-12 months;
- proof of the applicant's address. This may be an electricity or water bill (not very old, up to six months) a fine, etc. The applicant's name and address in their home country must be indicated in this bill. If an applicant has a Turkish residence permit and an address, they can confirm the address in Turkey;
- a Turkish tax ID number. It is issued free of charge, you just need to go to the local tax office in Turkey;
- a certificate of ownership (a TAPU and its photocopy) for a property you are going to buy in Turkey.
We also recommend considering documents that are not mandatory, but which can also help you get a bank approval of a mortgage loan in Turkey. These documents include:
- papers confirming the fact of ownership of real estate, cars, land or any other valuable property;
- documents confirming the applicant's incidental income (rental of real estate, pension, alimony, etc.).
The procedure for obtaining a mortgage by foreigners in Turkey is regulated by the Law on Mortgage for Foreign Citizens, which came into force in March 2007.
Can a foreigner apply for a mortgage in Turkey remotely?
Yes, they can. The coronavirus pandemic made property sellers in Turkey develop online property sales for foreigners. These property transactions do not require the personal presence of a foreign buyer and are carried out under a power of attorney, which a foreign buyer draws up on a representative of a developer company or a real estate agency in Turkey. A foreign national can get such a power of attorney for obtaining a mortgage loan in a Turkish bank. Make sure you choose a trusted company with a good reputation, extensive work experience and positive reviews (especially about mortgage transactions).
What are the mortgage costs for a foreigner in Turkey?
A home loan will cost a foreign national buying an apartment approximately €1200-1500. This money will include all expenses - from services of a sworn translator and notary, the examination of a property to insurance and bank commission (0.05% of the loan).
Examination of an property is a mandatory procedure that allows the bank to assess the prospects of a particular property and determine the size of the loan. The examination is carried out by appraisers from the bank and is paid by the mortgage applicant, the cost of the examination at the end of 2020 is 1,300 TL (about €140).
Apartment insurance (against the threat of earthquakes) is also a mandatory procedure, which costs €150-250 per year.
Can a foreigner get a mortgage for an off-plan property?
Mortgage loans in Turkey are issued by banks only for finished, commissioned properties, which have an iskan (a certificate of habitation). Mortgage loans are also issued for apartments with living space more than 50 square meters. What if I want to get a loan for an off-plan apartment? We recommend using an interest-free instalment plan from a developer. And then, when the property is ready, you will be able to apply for a mortgage. A developer usually offers an interest-free instalment plan until the end of construction and even longer. The first payment for an apartment is about 30-50 percent.
Can I pay off a mortgage apartment in Turkey through rent?
As a rule, renting out a new apartment pays off about half (sometimes two-thirds) of the mortgage. It means that it is better not to fully rely on the rent. For example, a 1+1 apartment (in Alanya, Antalya, Mahmutlar, Belek, Istanbul, Izmir) can be rented out in a long-term lease for 1,500-2,000 TL per month and a mortgage payment for such an apartment will be about 3,500-4,000 TL per month.
Mortgages in Turkey in 2020: interesting facts
- Thanks to the mortgage campaign, property prices in Turkey rose to record highs in 2020. From January to November, the average rise in apartment prices in Turkey was recorded at the level of 29.6%. According to TurkStat, in the province of Antalya, which is popular with foreign property buyers housing prices rose by 46.15% and in Alanya - by 78.27%.
- The mortgage campaign has helped Turkey to recover from the coronavirus by launching 250 subsectors of the economy related to the construction and real estate sector.
Due to record sales of mortgage properties in Turkey, the country has almost run out of new apartments. Real estate experts predict that in the next few years there will be a shortage of new housing in Turkey.