Mortgage for Foreign Nationals in Turkey?

There is high demand for the residential properties in Turkey from the citizens of the Gulf states in particular. So how do these sales take place? What are the rates of loan use?

Onur Yılmaz
Onur Yılmaz

The mortgage legislation has been in effect in Turkey since 2007. However, even today, it is still a matter of debate as to whether it is being applied correctly. And it will not be correct to expect that the volume of mortgages will increase by a large amount due to reasons such as the interest rates, the limitations on the term by the banks and the inability to move the mortgage when moving property. Around 33% of property sales were completed using mortgages in 2015. Due to the interest rates remaining high, this fell to around 30% in the first 5 months of 2016.

On the other hand, while there are no definitive figures for foreign nationals, it is said by bankers that this figure is 5%. That is to say, only 5 out of every 100 properties sold to foreign nationals are done so with a mortgage. One of the most important reasons for this is that the banks do not have much of an appetite for this.

Banks prefer not to give mortgages to foreign nationals

While a foreign national residing abroad cannot obtain a personal or vehicle loan in Turkey, there are no hurdles preventing him or her from obtaining a mortgage. It is sufficient to have the address in his passport translated into Turkish by a certified translator, and obtain an address registration certificate and a taxation number. However, while legally mortgages are able to be given up to 75% of the valuation, this is generally only implemented up to 50% for foreign nationals. Banks give mortgages to foreign nationals who already reside in Turkey, work here or who are consular staff, more easily. Otherwise, if they already have another property in Turkey, able to find a guarantor or provide security, or present more detailed information concerning their income, the likelihood of the loan increases.

Of course, it is also possible for foreign nationals such as those who have resided in Turkey for more than 6 months, who work here or are consular staff, to obtain personal loans for the purposes of buying a residential property. This is called a completion loan, and is mostly used for properties which do not meet the criteria for mortgage loans.

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Advantages of buying in cash

One of the other reasons why the number of mortgages given to foreign nationals is low is that they are actually not preferred by foreign nationals very much either. There is a price advantage when buying in cash. And the entry of large amounts of money is not really a problem either.

In addition to this, the company building the project may provide easier terms than the banks. Tax advantages are also available by stating the price of the property to be lower than it actually is, in second hand projects and single block smaller projects being built by smaller scale contractors, in particular.

Branded property projects prefer to sell in cash

On the other hand, the situation in branded property projects is a little different. Irrespective of what the amount is, it has to be officially stated. In addition to this, a 70% level of construction is required in order to be able to obtain a mortgage. As branded properties are generally sold as early as the laying of the foundation, an agreement needs to be reached with a bank, and a guarantor loan provided in order to be able to obtain a mortgage. Where a loan has been provided at the project stage, the company is also responsible for it until the property has been completed. If two installments are not paid, the bank is able to collect the loan from the company. As the legal proceedings for this are more difficult in the case of foreign nationals, branded projects generally prefer to sell to foreign nationals in cash.

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Loans are not a priority of banks

Due to all of these reasons, even if the sale of real estate to foreign nationals in Turkey does increase, it does not look like the amount of mortgages being provided will rise by very much. That is because, even if this instrument is on offer at the bank, giving mortgages to foreign nationals is not a priority strategy of the banks.

The priority on the subject of mortgages needs to be to solve the fundamental structural flaws and bring the practices to the international standards. In order to encourage foreign nationals to use mortgages in Turkey, the practices need to be the same as they are in their own countries.

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