Factors to Consider Before Getting a Mortgage in Turkey

Factors to Consider Before Getting a Mortgage in Turkey

By: Berk Akman

The Turkish residential mortgage market has grown significantly over the last few years mainly driven by falling interest rates. The "New Mortgage" law that passed in March 2007 further strengthened the legal background for both primary and secondary market triggering a sudden increase in the mortgage product variety. While there were only a few mortgage products before the new mortgage law, currently there are more than 20 different mortgage products for consumers. However, the fast growth in the market has not been absorbed by the general public. Surveys show that more than 50% of the people don’t have sufficient understanding of the new mortgage system. Moreover, most people have the perception that the new mortgage system is a miraculous system that will let them buy houses without any savings and with very low monthly payments. This article addresses some of the misconceptions and draws attention to the reality by focusing on the real costs of mortgages.

Length of Loan and Interest Rate Relation: While some banks have started to offer mortgage loans up to 30 years in Turkey since the new mortgage loan passed in March 2007, currently the mortgage rates in Turkey are too high to get a loan with loan length of longer than 10 years. The consumers would be better off with loans less than 10 years. To demonstrate the irrationality of getting a loan with a length of more than 10 years a simple comparison of monthly payments in a few cases will be sufficient. When monthly interest rate is around 1.30% for most banks, as it is in November 2007, monthly payment of only 2-year loan would be 4,877 New Turkish Lira (YTL). Extending the length of the loan to 10 years, would decrease the monthly payments to 1,650 Turkish Lira, a 82% reduction in the monthly payment. While 82% reduction in monthly payments is significant by extending the length of the loan by 8 years, a further extension in the length of the loan does not decrease the monthly payment significantly. For example, if the length of the loan is assumed to be 20 years, the monthly payment will decrease to 1,361 YTL, an additional 18% reduction from the monthly payment in one-year loan. So increasing the length of the loan an additional 10 years decreases the monthly payment by only 18% more. Even more interestingly, for 30-year loan, the monthly payment decreases to 1,313 YTL, an additional 4% reduction in the monthly payment for another extension of 10 years in the loan. Let’s note that if the interest rates were lower, the optimum point for length of loan would be more than 10 years. For example, if the monthly interest rate were 0.5%, the reduction in the monthly payments would be 87%, 35% and 16% for 10 year, 20 year and 30 year loans respectively (as opposed to 82%, 18% and 4% with 1.3% monthly interest rate). Similar length of loan comparisons can be computed with a mortgage payment vs. length of loan (i.e., mortgage vade-taksit karşılaştırma ) comparison calculator.

Cost of the loan: Interest rates, commissions and fees The most important thing consumers should do is calculating the real cost of the loan. The cost of loan includes the interest rate, expertise costs, insurance costs and most importantly, fees and commissions. While interest rates of the banks are usually available on their web pages, most banks do not choose to publicize the commissions and fees upfront. There are cases when consumers apply for mortgage and goes through all the paperwork without any clue about the fees up until the last steps. Since it is usually known that fees are overlooked by the consumers, some banks offer low interest loans with significantly higher fees, which turn out costlier than the high-interest loans. Such incidents can be avoided if the consumers search internet for the mortgage costs. Kredihavuzu.com provides comprehensive information about the mortgage costs for every bank. Effective interest rates should be calculated to compare the real costs of the loan across different mortgage products with fees included in the costs.

Early Closure Fees: Early closure fees up to 2% of the remaining loan apply to the fixed interest mortgages. Adjustable rate mortgages can be closed without any closure fees.

Expertise Expenses : Before applying for a mortgage, consumers should make sure that the real estate that they plan to buy is eligible for mortgages. Otherwise, consumers may need to pay the expertise expenses (between 250 to 600 YTL) without being able to get the loan.

Berk Akman is working for KrediHavuzu.com, Turkey's leading online mortgage services company dedicated in providing up-to-date interest rate and fee information of the lenders, various mortgage tools and products for optimal mortgage design.

Article Source: http://www.ArticleBiz.com

Getting a mortgage with a bad credit rating: Is Doable?

Getting a mortgage with a bad credit rating: Is Doable?

My experience shows that people who convince themselves that they can never own a house because of their bad decisions in the past (which leads to bad credit) are incorrect. An increasing number of donors are opening the door to those who have poor credit because they think they deserve a second chance. There is a tendency to believe that a person with an excellent obtains a mortgage easily. Although it is not easy, it is certainly possible to have one for yourself.

Bad credit record and mortgages
Twenty years ago, those who have bad credit would be difficult to be approved for a mortgage. Today, it is a common sight since lenders have made their rules and regulations are sufficiently flexible. It helps to attract a wider audience. But with bad credit, you may still have difficult to find a lender. You must be clear about what to expect. This makes the whole process easier quiet.

First, do not paint a gloomy picture when you will be reduced by many people before someone accepts you. When you apply for a loan there will be several things you should include: your name, address, your social security or taxpayer identification number, as well as your last tax return. It varies from lender to lender but you may need to provide proof of a bank account. Because you yourself bad credit may also be asked to get some references. You will be able to obtain letters of credit or reference of most public services, which is basically that you are a customer and you pay your bill. A letter from your school (if you have loans with them) or personal letters from your past, lenders can be achieved to increase reliability in your eye lenders.
In general, even if you have a bad credit you are still manage to obtain approval for a mortgage. If you can not ask someone to co-sign with you. A co-signer is to let you borrow their credit score to help you get approved for the loan. While this seems like a simple answer, you must keep in mind that if you default on your mortgage, you not only hurt your credit, but the credit of your co-signer. The co-signer must be informed and must discuss the issue in depth before he was caught in a trap.

Deposit is another way to obtain a mortgage with bad credit. Sometimes you will need to have as much as 15 to 20% of the selling price to be deposited in the house. This shows the lender that you are serious about keeping the home and when they know that you have invested, they assume you keep your end of the timely processing monthly payments. We realize that if a co-signer or payments can he achieve a better interest rate than in the absence of either of these two things. If you have a co-signer and you need a loan of 100% of the purchase price, you can expect your interest rate to be as much as 5% higher than average.