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The difference between an instalment and a mortgage in Turkey

The dream of many foreign citizens is to have their own property or holiday villa in a countryside resort in the Republic of Turkey. In Turkey, the purchase of apartments allows to enjoy the hot weather, the blazing sea and the bright sun with no time limit, and at the same time, foreigners are also attracted by the favourable prices, the simple and straightforward purchase procedure and the possibility to move to a permanent residence on a legal basis. Also having a Turkish citizenship.

Although the comparatively lower cost, not all foreigners can afford to buy a property immediately, with the necessary amount of money. There is an option for such investors to buy a property in Turkey in instalments or mortgages.

About the pros, cons, and terms of these types of funding options, please see our information here.

Let’s take a look at the difference with Tolerance Homes, a licensed real estate agency in Turkey.

The property in Turkey by instalment from the developer – it is buying the object, under the conditions where the buyer pays the cost of the property to the developer company in instalments.

The Schedule of payments is agreed upon individually with each investor. All the financial paperwork is done within the development company and without any involvement of banks, thus making the process easy and avoiding any commission fees. Once the full amount is paid off, the ownership is formalised under the name of the new owner.

A mortgage for foreigners in Turkey is a loan given by a bank of Turkey for the purchase of the real estate. The property that the investor is buying is used as collateral.

Each month, the borrower must pay a fixed amount with a percentage fee as long as the loan is not repaid. The TAPU is registered directly under the buyer, but the property is also encumbered. During the mortgage, the property could not be sold, gifted, or passed on as an inheritance.

Definitely, both types of funding have some advantages and disadvantages for the investor. Before you decide in favour of an instalment or mortgage, it is recommended to examine the terms and conditions in depth.

The benefits of a property in Turkey on an instalment plan from a property developer

The lack of interest rates is crucial for many buyers when opting for an instalment plan from a property developer in Turkey. Nevertheless, the short repayment periods, which are dependent on the construction completion of the complex, are important to be taken into consideration. If the buyer or seller breaks their obligations, penalties are provided under the terms of the contract.

The instalment plan from the property developer to buy a property in Turkey has a number of benefits for the investor. More specifically:

  1. Formalization of the TAPU for the new owner is immediately after paying the whole amount.
  1. A small initial deposit of 10-30%, depending on the company-developer’s conditions.
  1. Instalment payment is calculated for the period of ongoing construction work – generally from 1-3 years. It is possible to make a payment monthly, once a quarter or by reference to the construction progress. However, several companies are offering more extended payment terms – after construction is completed and the property has been commissioned. Meanwhile, if you take out a mortgage be ready to pay the loan within 10-15 years.
  2. The majority of property developers in Turkey offer an instalment plan without any kind of interest.
  3. Depending on the investor’s preferences and possibilities, the remaining amount can be easily paid off at any time, which means that the instalment can be paid off beforehand.
  4. The interest-free instalment process takes just 1-2 days. In contrast to mortgage loans, however, there are no delays related to the verification of the borrower’s ability to pay and the completion of the document package.
  5. The only thing needed is a passport and a minimum deposit.
  6. There are no additional costs.
  7. Property from the Developer’s apartments in the initial stage of construction is the most advantageous cost. The price of housing in Turkey is increasing gradually and towards completion of construction work is increased by approximately two to three times.

Most importantly, property in Turkey in instalments from the Developer will guarantee a high investment potential. Firstly, you get at your disposal a house in a new modern house with internal infrastructure. At the same time, as soon as the property is ready for use, you can rent out your property and receive a regular income or resell it in a few years with a good return on your investment.

The benefits of mortgage loans for foreigners in Turkey

Mortgages in Turkey are popular among foreigners due to the opportunity to pay the cost of the property in low amounts over a period of between 5 and 15 years. These conditions are of interest to those buyers who have no significant amount of deposited funds. In order to protect themselves, the Turkish banks stipulate the interest rate in the mortgage and also check very carefully the ability of the clients to fulfil the conditions of the loan.

The following conditions are applicable upon the granting of a mortgage:

  1. Once the loan is granted, the ownership is registered under the buyer’s name, however, the property is being pledged by the bank. In addition, the bank will also require you to submit a package of documents, which include, besides your passport, the TAPU and Iskan of the property, a statement from the bank about the balance in the account, etc. You will also need to pay additional bank charges, notary fees and insurance.

2. The initial payment varies between 20-50%, a reasonable sum for most investors.

3. A mortgage loan to buy property in Turkey is valid for a maximum period of 15 years.

4. The interest rate is 4.5% – 7.5% and it is a lot more favourable conditions compared to the EU countries.

5. When the contract is signed, the final value of the property is fixed and will not vary throughout the period of repayment on the loan.

6. All payments are made each month. The bank charges a penalty for prescheduled repayment of the loan – 2% of the price of the property.

7. Through the financial institution, you can be sure that your property documents are legally clean, which will guarantee you that there are no hidden burdens, prohibitions on sales, loans, etc.

8. The time for processing is 5-7 business days. Only in very special cases, it can take a few weeks or a month.

Once the agreement of sale has been signed and the TAPU has been handed over, the property is handed over to the new owner, who can immediately move in and live there.

Just as you can see, the type of financing method you choose depends entirely on your preferences. Some buyers value a long loan repayment period, despite the interest rate charge. Others prefer a small initial payment, a short instalment payment schedule and no additional costs.

Regardless of your choice, we recommend getting professional help from a licensed real estate agency Tolerance Homes. We can assist you in choosing a liquid property in Turkey, select the best possible financing option, accompany you at every stage of the registration process, and offer after-sales services. Do not hesitate – contact Tolerance Homes company today!

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