Loans and Insurance
Loan-to-Value Ratio and Down Payment
How much of a home's value will banks lend against? The loan-to-value ratio, the role of the appraisal value, and what to consider when planning your down payment.
2 min read
In a mortgage, the amount a bank can lend is capped relative to the home's value. This cap is called the loan-to-value (LTV) ratio and is set by regulation. The ratio can vary by the home's value and, at times, by criteria such as energy rating.
Which value is used?
The loan-to-value calculation uses whichever is lower: the value in the appraisal report or the sale price. If the appraisal value comes in below the sale price, the loan amount drops and you cover the difference as part of your down payment.
Example
| Example 1 | Example 2 | |
|---|---|---|
| Sale price | 5,000,000 TL | 5,000,000 TL |
| Appraisal value | 5,000,000 TL | 4,400,000 TL |
| Loan-to-value ratio | 75% | 75% |
| Maximum loan | 3,750,000 TL | 3,300,000 TL |
| Down payment required | 1,250,000 TL | 1,700,000 TL |
Planning your down payment
- Factor in the title deed fee (tapu harcı), commission, and moving costs alongside the down payment.
- Don't put all your savings into the down payment; keep a reserve of a few months' installments in case your income drops.
- Increasing your down payment noticeably lowers both the interest cost and the monthly installment.
This content is for general information only and is not a substitute for legal, financial or tax advice. Rates, amounts and legislation can change over time. Confirm current information with the relevant authority or a professional before proceeding with a transaction.