TYPES OF MORTGAGES IN TURKEY
According to the Turkish Civil Code, the types of mortgage in Turkey are the principal mortgage and the limit mortgage.
a) Principal (Debt) Mortgage:
This type of mortgage in Turkey is taken for a specific, current and definite debt. Since the debt mortgage is established for a current debt, it does not provide security for the other debts of the creditor (bank). Therefore, if the debt secured by the mortgage is paid, the creditor (bank) can no longer benefit from this mortgage, even if it is registered in the land registry records. In addition to the principal amount written in the mortgage deed, the principal mortgage also secures the default interest, contract (agreement) fees, and legal fees that are included in the mortgage. Principal mortgages can be established in Turkish Lira or in foreign currency.
The advantage of a principal (debt) mortgage in Turkey is that if it is converted to money, the debtor can be served with an execution order since the debt recognition is included in the deed.
In practice, principal mortgages are taken as collateral for consumer loans (such as housing finance loans, business loans, personal loans, vehicle loans, etc.) given to the borrower. As the amount of these loans is a certain amount of cash bank credit in Turkey, the mortgage is established for a specific debt.
However, if a third-party mortgage is taken as collateral for these loans, according to settled Turkish Court of Appeals precedents, a “upper limit mortgage” must be established instead.
b) Collateral (Upper Limit) Mortgage:
It is a type of mortgage established to secure existing, future or potential receivables. In a collateral mortgage in Turkey, the upper limit of the receivable secured by the mortgage is determined. Interest and follow-up expenses are covered only within the mortgage amount. Therefore, if there is a potential debt that may arise in the future, it is not possible to determine the amount of this debt at the time of the mortgage establishment.
Therefore, the amount for which the property will serve as collateral at maximum must be shown in the mortgage application and the official mortgage document. Therefore, when banks establish a mortgage, they consider the interest rates and the appreciation of the property value and set the mortgage marginally based on the property appraisal value.
In non-cash loans, since the bank takes on a potential risk, and since there is no specific receivable, it is obligatory to take a collateral (upper limit) mortgage in Turkey. According to Article 95 of the Turkish Commercial Code, since none of the parties are considered as creditor or debtor before the account of the loan is closed, it is necessary to take an upper limit mortgage for loans that operate as a current account.
The advantage of a collateral (upper limit) mortgage in Turkey is that the bank can create security for all of its existing and potential receivables -provided that they are specified in the contract- through the mortgage. The upper limit mortgage registered in the land registry continues indefinitely unless it is terminated.
In a collateral mortgage in Turkey, the maximum liability due to the property is limited to the mortgage amount (including principal, contractual interest, default interest, and all kinds of expenses). The mortgagee (bank) cannot make any claim beyond the amount specified in the mortgage document (mortgage limit), even if the receivable exceeds the mortgage limit (even if the mortgage limit does not cover the entire receivable). The excess part cannot be covered from the mortgage amount.
Mortgages create security according to the rank in which they are registered. Accordingly, the security provided by the mortgage is limited to the degree specified in the land registry. Depending on the degree in which the mortgage exists, the receivables of each degree mortgage have priority over the receivables of subsequent degree mortgages. If second and subsequent degree mortgages are established with the “right to benefit from the free degree”, the mortgages in the subsequent degree can automatically pass to the vacant previous degree (e.g. the first degree).
If the right to benefit from the free degree is not granted to the mortgage holder (the bank), the mortgage in the subsequent degree cannot pass to the previous degree automatically. In this case, the owner of the immovable property subject to the mortgage may establish a mortgage in the same degree in the vacant degree if desired. Therefore, this issue should be carefully considered when taking out a mortgage.
CAN MORTGAGED PROPERTY BE SOLD?
It is possible to transfer (sell) mortgaged immovable property to another person without the consent of the mortgage creditor (bank). In case of the sale of all or part of the mortgaged immovable property taken as collateral with a mortgage to a third party, the relevant Land Registry Office informs the branch about the sale transaction and provides the addresses of the old and new owners in writing.
Although the answer to the question of “can mortgaged property be sold?” is positive, this sale carries many risks for the new owner.In case of the sale of the mortgaged immovable property, the new owner will continue to be responsible for the mortgage. In other words, in case of a possible default by the previous owner, who is the debtor, the mortgage creditor may initiate the necessary procedures to convert the immovable property into cash. Since the new owner has purchased the property with a mortgage, they are responsible for the mortgage and have no right to object.
MORTGAGE ESTABLISHMENT OVER FOREIGN CURRENCY
According to Article 851 of the Civil Code, credit institutions operating domestically or internationally may establish mortgages over foreign currency or based on foreign currency measurement (indexed to foreign currency) to secure loans granted in foreign currency. In this case, the amount represented by each rank will be shown based on the currency of the debt being pledged, but a mortgage cannot be established using multiple currency types for the same rank.
Without the right of free degree utilization, if a rank in a mortgage established over foreign currency is vacated, it can be replaced by a mortgage registered in Turkish Lira or foreign currency at the equivalent rate at the time of registration.
If the lower rank mortgage creditor does not have the right of free degree utilization, another creditor can have a mortgage established in their favor for the amount vacated in the vacated rank.
If a foreign currency mortgage is taken as collateral for the initial loan granted to a creditworthy customer, this foreign currency mortgage cannot serve as collateral for any subsequent loan granted in Turkish Lira. A real estate mortgage cannot be established over foreign currency for the collateral of loans granted in Turkish Lira.
However, mortgages established in Turkish Lira can also serve as collateral for loans granted in foreign currency.
MORTGAGE ESTABLISHMENT FOR HOME LOANS IN TURKEY
Individuals who want to get a home loan in Turkey can take advantage of the credit facilities provided by banks. However, banks require certain guarantees before providing these loans. One of these guarantees is known as a mortgage establishment.
Mortgage refers to giving a property (usually a house or land) as collateral for a debt. A mortgaged house is held by the bank until the loan is fully repaid. Therefore, mortgage establishment provides an important way for banks to reduce their risks.
Individuals who want to get a home loan in Turkey can mortgage their homes after meeting the conditions set by banks. During the mortgage establishment, the real value of the house is determined by the bank, and the specified amount of bank credit in Turkey is provided. If there is an unpaid loan debt on the house, the bank can sell the mortgaged property to collect the debt.
To establish a mortgage in Turkey, the property deed or official registration document of the house is required. The deed shows the owner of the house and serves as proof of ownership. The property deed or official registration document is requested by the bank and is a necessary document for loan applications.
Individuals who want to get a home loan in Turkey can use mortgage establishment to borrow from banks. However, it should not be forgotten that loan payments must be made regularly and debts must be paid on time before establishing a mortgage in Turkey. Otherwise, there may be a risk of losing the mortgaged property.
MORTGAGE ESTABLISHMENT FOR COMMERCIAL CREDIT IN TURKEY
Businesses that want to obtain commercial bank credit in Turkey must meet the credit conditions set by banks. One of the most important conditions among these is known as mortgage establishment. Mortgage refers to pledging an immovable property (usually a land, building, or other business asset) as collateral.
Establishing a mortgage for commercial bank credit in Turkey is an important way to reduce the creditor’s risk. If the business is unable to pay its debt, the creditor can collect the debt by selling the mortgaged property. Therefore, mortgage establishment provides security for creditors.
Businesses in Turkey that want to obtain commercial bank credit in Turkey can mortgage their immovable properties after fulfilling the conditions set by banks. During the mortgage establishment process, the actual value of the immovable property is determined by the bank, and the specified amount of credit is provided. In case of unpaid debt, the bank collects the debt by selling the mortgaged immovable property.
Establishing a mortgage for commercial credit can provide many advantages for businesses. Mortgage-backed credit interest rates are lower than other types of commercial credit, and higher credit amounts can be obtained. Additionally, mortgage-backed credit can help businesses achieve their growth and expansion plans.
However, establishing a mortgage for commercial bank credit in Turkey can also pose some risks for businesses. Especially, if the business is unable to pay its debt, selling the mortgaged immovable property can further worsen the business’s financial situation. Therefore, it is crucial for businesses to make their credit payments regularly and to pay their debts on time.
Businesses in Turkey that want to obtain commercial credit have the option to mortgage their immovable properties to obtain credit. When establishing a mortgage in Turkey, the actual value of the immovable property should be determined, and credit payments should be made regularly. It is important for businesses to be disciplined in paying their debts on time and to adhere to their payment plans. This way, commercial bank credit in Turkey can be used to support the growth and development of businesses.
MORTGAGE PROCESS IN TURKEY
In Turkey, a legal procedure must be followed to establish a mortgage in Turkey for both commercial and residential loans. The steps involved in this process are as follows:
- Step 1: Property Registration
The first step in the mortgage in Turkey is to have the property registered in the Land Registry. The Land Registry is an official document that shows the owner and ownership of the immovable property. The title deed of the property to be mortgaged is necessary to initiate the mortgage process.
- Step 2: Contacting a Bank
The second step in the mortgage in Turkey is to contact a bank. Individuals or institutions who want to apply for a loan for the property to be mortgaged can apply by contacting a bank.
- Step 3: Assessment Process
The bank evaluates the mortgage loan in Turkey application and determines the value of the property to be mortgaged. An expert assesses the property’s actual value by taking into account its location, size, characteristics, and other factors.
After reviewing the mortgage loan in Turkey application and the results of the property evaluation, the bank can approve or reject the loan application. When the mortgage loan in Turkey application is approved, the bank determines the loan amount and repayment plan.
- Step 5: Mortgage Contract
After the mortgage loan in Turkey application is approved, a mortgage contract is signed between the bank and the property owner. The mortgage contract states that the property is mortgaged as debt. The contract includes the loan amount, interest rate, repayment plan, and other loan conditions.
Several different fees may need to be paid during the mortgage process. These fees may include land registry fees, mortgage establishment fees, evaluation fees, loan allocation fees, and insurance premiums. These fees are paid to cover the expenses incurred during the mortgage process.
- Step 7: Land Registry Procedures
The final step in the mortgage in Turkey is the land registry procedures. The mortgage contract of the property to be mortgaged is signed at the Land Registry Office and registered, and the mortgage process on the property is completed. This transaction is recorded in the land registry and shows that the property is mortgaged.
In conclusion, the mortgage in Turkey involves starting from the property’s registration in the Land Registry, contacting a bank, assessment process, loan approval, mortgage contract, transaction fees, and land registry procedures. In the mortgage process, the property’s actual value should be determined, and loan payments should be made regularly. Therefore, it is essential for loan recipients and businesses to be disciplined in paying their debts on time and to adhere to their repayment plans.
OBSTACLES TO MORTGAGE IN TURKEY
Those who want to take out a loan must ensure that they meet the necessary conditions for obtaining a loan. Some of the obstacles to obtaining a mortgage in Turkey are as follows:
- Low Credit Score: Credit score is an indicator of your financial history, and lenders require a high credit score for a mortgage application. A low credit score can lead to a mortgage application being rejected or facing high-interest rates.
- Insufficient Income: When applying for a mortgage loan in Turkey, your income must be sufficient. Lenders look at whether you have a regular job, how much your salary is, and how much you allocate for monthly debt payments when determining your income. Insufficient income is one of the obstacles to obtaining a mortgage in Turkey and can lead to a rejection of your application or high-interest rates if the loan is approved.
- Decline in Asset Value: Mortgage loans are usually based on the asset purchased. However, over time, the value of the purchased asset may decrease. In this case, lenders in Turkey may have the option to reject the mortgage application or offer a lower loan amount.
- Payment History: Delays in your previous debt payments or inability to collect your debts can lead lenders to reject your mortgage application in Turkey. Payment history is one of the most important factors that determine whether lenders trust you.
- Restrictions on the Property: There may be liens and declarations that restrict or reduce the value of the property to be mortgaged in Turkey. These restrictions and declarations can be obstacles to obtaining a mortgage. In this case, your mortgage application in Turkey may be rejected or a lower loan offer may be made. You can refer to our article on liens and declarations that affect the value of the property.
In conclusion, mortgage loan in Turkey are large financial transactions, and lenders consider many factors before approving a loan. Before applying for a mortgage in Turkey, it is necessary to meet the requirements of the lenders.
CAN FOREIGNERS GET LOAN IN TURKEY?
Although the answer to the question “can foreigners get loan in Turkey?” is positive; foreigners who wish to obtain bank credit in Turkey need to fulfill a series of procedures, particularly those related to financial institutions. These procedures must comply with Turkish laws and the conditions of financial institutions for foreigners get loan in Turkey. Therefore, foreigners who want to obtain bank credit in Turkey should conduct detailed research on the credit process in Turkey before applying for credit.
- Step One: Research Banks in Turkey
There are numerous banks in Turkey. The first step for foreigners who want to obtain bank credit in Turkey is to select a suitable bank. The websites of banks in Turkey provide information about the credit process and the required documents. Therefore, foreigners should examine the credit interest rates and obtain detailed information about the credit process when selecting a suitable bank.
- Step Two: Gather Required Documents
Banks in Turkey require a specific list of documents before granting credit. Foreigners who want to obtain bank credit in Turkey need to provide the documents required by banks. These documents may include a passport, residency permit, salary slip, tax return, property deeds, and credit score.
- Step Three: Prove Your Income
Banks usually require the following documents to prove your income: • Employer certificate • Salary slip • Tax return • Bank account statements • Rental agreements and income declarations (for property owners) In addition to these documents, some banks may also refer to international credit reports to verify the income of foreigners. These reports may provide information about foreigners’ previous credit payment history and financial status.
Proving your income is a requirement for banks to lend credit to foreigners. Therefore, it is important for foreigners to prepare their income documents to get bank credit in Turkey.
- Step Four: Show Real Estate Collateral
Real estate collateral is usually preferred when foreigners need to reside in Turkey or establish a company in Turkey. Foreigners can obtain credit by showing the real estate they own in Turkey as collateral. However, there are some important points to consider when showing real estate collateral. First of all, the property must be legally owned. In addition, the value of the property in Turkish Lira must be determined. When foreigners want to obtain credit by showing real estate collateral, banks usually request documents such as the title deed, title registry declaration, zoning status, and a no municipal tax debt certificate. In addition, an independent appraisal report may also be requested to determine the value of the property.
- Step Five: Open a Bank Account in Turkey
Foreigners who want to obtain bank credit in Turkey must open an account in a Turkish bank. The account opening process is completed by providing certain documents and waiting for the time given by the bank. Therefore, it is important for foreigners to start their account opening process on time.
- Step Six: Apply for Bank Credit in Turkey
After collecting the necessary documents and opening an account in a Turkish bank, foreigners can apply for credit. The credit application process may vary depending on the bank’s terms and the type of credit. It may be necessary to wait for a certain period of time for the credit application to be processed.
Conclusion Foreign nationals who want to obtain bank credit in Turkey must follow the steps outlined above. The credit process for foreigners in Turkey consists of selecting a suitable bank, providing the necessary documents, checking the credit score, obtaining credit in Turkish Lira, opening an account in a Turkish bank, and applying for credit. Following the credit process and fulfilling the conditions during the credit process will make it easier for foreigners to obtain bank credit in Turkey.
LEGAL ASSISTANCE FROM A LAWYER FOR MORTGAGES IN TURKEY
When you take out a mortgage loan in Turkey, the lender will ask you to register the mortgage on the property’s title deed. It is extremely important to seek legal assistance to ensure that the process is carried out correctly and legally.
A lawyer can assist with the following:
- Preparation and review of the mortgage contract: The lawyer can help you understand the terms and conditions of the mortgage contract and make it legally binding.
- Application to the Land Registry Office: You need to apply to the Land Registry Office where the property is located. The application should include the mortgage contract, the property’s title deed, and other necessary documents.
- Payment of fees: You need to pay the necessary fees for establishing the mortgagein Turkey. These fees vary depending on the value of the property and the amount of the loan.
- Establishment of the mortgage in Turkey: After your application is approved and the fees are paid, the Land Registry Office will record the mortgage on the property’s title deed.
- Legal representation in matters related to mortgages: If you encounter any legal issues with parties such as the lender or seller during the mortgage process, the lawyer can represent you and protect your rights.
In conclusion, obtaining a mortgage in Turkey is a suitable option for property buyers and commercial enterprises. To obtain a mortgage, you need to choose a property, find a lender, prepare your documents, apply for a mortgage loan in Turkey, and complete the agreement.
It is important to remember that the mortgage in Turkey may be different from other countries and may require a bit more patience and perseverance. However, with the right approach and preparation, a mortgage can be successfully obtained in Turkey, and you can become a property owner. It is recommended to research various lenders and their offers and seek advice from professionals such as real estate consultants and lawyers to make informed decisions throughout the process.