What is real estate financing and what are its conditions?

What is real estate financing?

Real estate financing is one of the most important facilities provided by the Turkish government to businessmen wishing to invest in Turkey.

Based on the legislation stipulated in the Real Estate Finance Law No. 148 issued in 2001 and Law No. 10 issued in 2009, those wishing to own real estate can purchase a home by obtaining a long-term real estate loan from one of the official banks in Turkey. In exchange for this real estate loan, a mortgage is imposed on the housing until the loan repayment ends. In this way, the goal of real estate financing is to facilitate the process of real estate ownership and encourage investments in Turkey.

Advantages of using real estate financing to buy a home

The real estate financing system allows the investor to buy an apartment in Turkey by obtaining a bank loan worth up to approximately 80% of the value of the apartment, and this value varies from one bank to another. In this way, the investor can save a large portion of his savings instead of offering it in one payment as the price of the property. He can benefit from these savings in other investment sources.

In addition, real estate financing guarantees the purchase of an apartment in Turkey through installments that start from a minimum of 3 months and extend for a period of 10 years within the maximum limits. The installment period may also differ from one bank to another, and thus it is possible to own a property in Turkey and pay its dues like the landlord who Pays monthly rent.

On the other hand, one of the advantages of real estate financing is the long term over which the installments are paid, because the long terms in real estate financing provide benefit from low interest rates, and this contributes to raising the value of the property and benefiting from its investment returns.

Disadvantages of real estate financing

One of the most prominent disadvantages of obtaining real estate financing is the costs resulting from interest rates. There are some banks that impose large interest rates on real estate financing, which may sometimes reach double the price of the apartment. The costs do not stop at the large interest only, but extend to include real estate financing costs, closing fees, and insurance. Mortgage, property taxes, and other costs not taken into account.

On the other hand, long-term installments constitute a double-edged sword. On the one hand, they guarantee payment of the apartment price in installments over specific terms, and on the other hand, the long payment period over many years of time may constitute a burden on the apartment owner as days go by.

One of the disadvantages of real estate financing is not obtaining the title deed until all the installments have been paid, and if the value of the installments is large and the payment phase is long, this sometimes includes some risks, especially if we take into account the emergency circumstances that may befall a person.

What are the conditions for real estate financing?

Turkish laws impose some conditions on foreign investors in order to obtain real estate financing, and the most prominent conditions for real estate financing are the following:

• First: All installments are paid within a minimum period of 3 months and a maximum of 10 years.
• Second: The age of the applicant for real estate financing must not exceed 80 years.
• Third: Proof of documents confirming the amount of monthly income.
• Fourth: Completion of at least 80% of the construction of the residential project.
• Fifth: A copy of the real estate registry document for the property that will be the subject of financing.

Real estate financing in traditional Turkish banks

Traditional Turkish banks provide real estate financing services to those wishing to buy homes in Turkey. In providing real estate loan services, they rely on the interest system. The value of loan interest in traditional Turkish banks ranges between 4.5% and 7.5%, provided that the value of the installments recorded on the real estate loan does not exceed one third of the income. Among the most important traditional banks that provide real estate financing services are Al-Ziraat Bank, Guarante Bank, and Al-Ish Bank.

Real estate financing in Turkish Islamic banks

Some Turkish Islamic banks provide real estate financing services to foreign investors in Turkey. They allow obtaining a real estate financing loan with repayment conditions that are very similar to the conditions mentioned above, and provide housing financing with terms of up to 120 months. The financing conditions set by Turkish Islamic banks are free of... Usury installments, offering quick options for buyers looking for quick and easy financing without the need to deal with traditional banks. Among the most prominent Islamic banks that provide real estate financing services are Kuwait Turk Bank, Al Baraka Bank, and Ziraat Katlim Bank.