The cost of buying a home with a mortgage: How much will someone who borrows 1 million lira pay?

When it comes to buying a home in Turkey, housing loans are the first thing that comes to mind. While sales increase when loan interest rates decrease, a decline in sales is observed as interest rates rise.

This year, mortgage-backed sales were at rock bottom due to high loan interest rates. However, there was a jump in loan usage last month. While the number of homes purchased with a loan in January was 5,915 and the share of mortgage-backed housing was 7.4 percent, this figure increased by 278.2 percent in October compared to the same month of the previous year, reaching 21,095.

The share of mortgage-backed sales in the total rose to 12.8 percent. In the January-October period, loan uptake is 31.9 percent behind last year. Loan usage in 10 months reached 113,405.

WHEN ONE FALLS, THE OTHER RISES

When market data is closely monitored, the question 'why is loan usage increasing?' comes to mind.

The expectation that the Central Bank will cut interest rates is influential in this. The decline in policy rates will also begin to reflect on housing loan rates as of 2025.

When housing loan interest rates fall, housing price increases begin. Examples of this have been frequently seen in past years.

SOME SEE IT AS THE 'LAST EXIT'

Those who want to become homeowners before prices rise are knocking on the doors of banks.

Furthermore, those who take out loans at high rates during this period have the right to restructure when interest rates fall.

Those who can bear the high interest cost for a while will have the opportunity to protect themselves from housing price increases. However, it is important to discuss and learn the restructuring conditions with the bank from the beginning when taking out the loan.

HOW HAVE LOAN LEVELS CHANGED?

According to the Central Bank's data for the week of November 8, the annual interest rate on housing loans is at an average of 41.33 percent. This rate corresponds to 3.44 percent monthly. While the rate in question was 42.67 percent (3.55 percent monthly) in the week of September 27, it was at 49.60 percent (4.13 percent monthly) on August 30.

In summary, housing loan interest rates began to loosen starting in September. Let us remind you that these rates are average data in the market. Figures vary from bank to bank.

Currently, it is possible to find a housing loan with a rate of 2.79 percent at some banks. In most banks, rates are still hovering between 3 and 4 percent.

UP TO 90 PERCENT LOAN CAN BE USED

According to the report by Meltem Kara from Posta, those buying a home for the first time can use housing loans at higher rates than existing homeowners.

Those buying a home for the first time can use loans of up to 90 percent, depending on the value of the house and its energy class. For example, a person buying their first home with a value of 5 million liras will be able to use a loan of up to 4.5 million liras if the house is brand new and in energy class A.

THE RATE CHANGES IN CLASS B

Let's say a house with a value of 5 million liras is second-hand and in energy class B. In this case, the loan available is limited to 55 percent, and a loan of 2 million 750 thousand liras is issued.

If we diversify the examples, if a house with a value of 10 million liras is not energy efficient, a loan of up to 70 percent, or 7 million liras, may be issued.

LIMIT IS LOWER FOR THE SECOND HOME

On August 24, 2023, the BRSA (BDDK) issued a regulation for those buying their second home, stating: "In housing loans, the loan-to-value ratio will be applied by reducing it by 75 percent if the consumer, their spouse, or their children under the age of 18 own at least one residence."

Before the regulation, those who wanted to take out a loan regardless of how many homes they owned could get a loan of up to 90 percent of the value of the house. Since that date, if they own one home, the loan they can use with the 75 percent restriction drops to 22.5 percent of the value of the house.

For example, a person who already owns a home and wants to buy a brand new, A-energy class house worth 5 million liras will be able to get a loan of 1 million 125 thousand liras. If the same house is second-hand, the rate will drop to 15 percent, and the loan that can be used will drop to 750 thousand liras.

MATURITIES ARE SHORTENING

When looking at the maturity distribution of the loans used, an increase in preferences for loans of up to 5 years is noteworthy. The rate of housing loans with maturities of 1-5 years in deposit banks increased by 62 percent compared to the same period last year. As of November 8, the volume is at the level of 80.1 billion liras.

There is also a 64.6 percent increase in loans of up to 1 year. Here, the volume is at the level of 395.1 million liras. Although demand for short-term loans has increased, the lion's share is still in loans between 5-10 years: 357.1 billion liras.

REPAYMENT OF 1 MILLION LIRAS

According to the lowest rate in the market, a person who takes out a 10-year loan with 2.79 percent interest pays a monthly installment of 28,966 liras, while their total repayment is 3 million 475 thousand 928 liras.

A citizen who takes out a 10-year loan with 3.44 percent interest, which is the average rate in the market, pays 35 thousand 4 liras per month, while their total payment is 4 million 200 thousand 558 liras.