Turkish Property Financing Guide
Mortgage overseas – financing the purchase of your
new Turkish property
Before you start looking for your new Turkish property you should
work out your budget so you know what you can afford. If this means
obtaining finance then you should do this before setting your heart on
a new Turkish property which you cannot afford. You must also
consider whether a mortgage in Turkey or in the UK is best for
you.
Arranging a mortgage in Turkey
Most people are unable to buy outright and must arrange finance to
buy overseas property. A property purchase always represents a risk,
particularly when it is in a foreign country. This makes it imperative
to take professional legal advice at all stages of the process of
buying property overseas.
In seeking to minimise this risk you must decide whether it is
better to take out a mortgage in Turkey or at home.
A Turkish mortgage overseas for your Turkish property
Deposits for a Turkish mortgage tend to be higher than in the UK
and at least 20% would be a common figure that would need to be put
down on a Turkish property.
Although the market for property overseas is growing all the time,
the range of mortgages overseas still lags some way behind the UK. In
Europe, interest rates are normally tied to the EURIBOR, which has
been lower than Bank of England rates for the past few years.
How much a bank will lend you to buy overseas property depends upon
your net monthly income. The situation differs from country to country
but as a rule of thumb your repayments should not exceed one-third of
your income. If you take a mortgage overseas then it will be secured
on your property overseas, meaning there is no risk to your UK assets.
Buying a property overseas with a UK mortgage
A mortgage must be secured by property in the same country. To
obtain a UK mortgage for overseas property you would therefore need to remortgage your main UK residence and release equity to buy the
property overseas.
UK banks are willing to lend a far higher percentage of the cost
than you would get from a mortgage overseas. There is less to pay in
set-up fees but the interest rate is higher than in many other
countries.
Many UK banks now operate in other countries and have introduced
more flexibility and choice to the market for those looking at a
mortgage overseas for their overseas property. Whatever option you
choose, you must give careful consideration to what will be the best
method of financing your property overseas.
A mortgage overseas for properties abroad
Most people looking at properties for sale abroad need to obtain
financing for their purchase. This is something you must think carefully
about as decisions you make at this stage of buying properties abroad can
have implications regarding inheritance, tax and the cost of your
property. One such decision you must make is whether to take a mortgage
abroad or in the UK.
Get a mortgage overseas before making an offer for properties abroad
You should get a mortgage offer before you start looking for properties
abroad. Buying properties abroad always poses an element of risk, so
before you even start looking at properties for sale abroad you must think
of how you can minimise this risk. Taking a mortgage overseas eliminates
the risk of your UK home being repossessed, but you must weigh this up
with other advantages/disadvantages of the two options.
Advantages of a mortgage overseas when buying properties abroad
You may find that interest rates are lower than in the UK, meaning you
will be able to afford more expensive properties for sale abroad. In
Europe, interest rates are normally tied to the EURIBOR, which has been
lower than Bank of England rates for the past few years.
Each country differs in respect to how much banks will lend you for
properties for sale abroad but it will depend upon your net monthly
income. As a rule of thumb, the repayments on your mortgage overseas
should not exceed one-third of your income.
If you are renting out properties abroad then you may be able to reduce
your overseas tax bill by offsetting the cost of the mortgage against
income received. A mortgage overseas may also be able to reduce the net
value of your properties abroad, significantly reducing the inheritance
tax payable upon death.
A mortgage overseas will be secured on properties abroad and therefore
your UK assets will not be at risk from repossession in the event of
defaulting on the loan.
Disadvantages of a mortgage overseas for properties abroad
Deposits for a mortgage overseas tend to be higher than for a
UK mortgage
(LINK). A figure of 20%-plus would be common and may leave you with a
shortfall to be found elsewhere. There is also likely to be higher set-up
costs with a mortgage overseas which add 2 to 3% to the cost of properties
for sale abroad.
The range of
available mortgages overseas is still limited in comparison to the UK and
if you are going to repay the mortgage overseas from your UK earnings you
will be exposed to major currency risk. This can dwarf the potential
savings on interest payments because of wild fluctuations.
Your
individual circumstances will dictate whether a mortgage overseas or in
the UK will be best for you. Remember that buying properties abroad means
huge financial commitments and think carefully about what type of
financing is best for you before viewing properties for sale abroad.
Properties overseas – foreign property mortgages from
UK lenders
When you see the overseas property for sale that is right
for you, hopefully you have the funding in place to secure it as
quickly, and as cheaply, as possible. If you require financing to make
the purchase you should have it in place before you start looking at
properties overseas. You must also decide whether to take a
mortgage for overseas property from a UK or international bank.
A UK mortgage for overseas property
You cannot get a direct mortgage on overseas properties from the UK
as banks only lend money against property in the same country. This
means you would need to remortgage your main home to buy overseas
property for sale.
This kind of UK mortgage for overseas property is obviously
attractive to those who have built up substantial equity in their main
home and want to take advantage of this. At the same time, it puts
your main home at risk if you default on the increased payments.
Other advantages to buying properties overseas in this way include:
No legal or Land Registry fees if you already have a UK mortgage
and obtain a further advance.
You may be able to negotiate a cheaper borrowing rate with your bank.There is a more comprehensive range of mortgage products and
greater flexibility.You may be able to raise more money than through a
mortgage for overseas property from an international lender.
No risk from currency fluctuation when taking a mortgage for
overseas property from a UK lender.
UK banks abroad offering mortgages for overseas property
A number of UK banks have branches and subsidiaries overseas. This
has allowed them to introduce greater flexibility and choice to the
market for properties overseas. In many places (particularly Europe)
interest rates are lower so it is doubly beneficial for those buying
overseas property for sale. Loans are secured on properties overseas
and your UK assets will be safe.
Mortgages for overseas property through international lenders
This typically means incurring higher set up costs although in many
cases this will be offset by lower interest rates. You will normally
be able to generate a higher percentage of the value of the overseas
property for sale through a UK lender. Overseas banks will not
normally lend past around 85% of the value of properties overseas.
There are a great many other advantages and disadvantages to taking
an
overseas mortgage when buying properties overseas. It is
recommended that you start the mortgage process well before looking at
overseas property for sale. Think carefully about whether a UK or
international lender offers you the best mortgage for overseas
property.
Foreign currency issues when buying properties abroad
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