The monthly instalment formula, the effect of the down payment, instalment-to-income ratio and extra costs; direct instalments compared with a bank loan.
For most buyers, a mortgage is the biggest financial commitment of their lives. Understanding how the monthly instalment is calculated protects your budget and lets you compare banks correctly.
How is the instalment calculated?
In equal-instalment loans, the monthly payment depends on the loan amount, the monthly interest rate and the number of instalments. Formula: instalment = loan × r × (1+r)^n / ((1+r)^n − 1), where r is the monthly rate and n the number of months. For example, a loan of 6,750,000 TRY at 2.49% a month over 120 months gives an instalment of about 177 thousand TRY.
The effect of the down payment
As the down payment ratio rises, the loan amount and total interest cost fall quickly. Raising the down payment from 25% to 40% for the same apartment can save hundreds of thousands of lira in interest over a 10-year term.
Term and total cost
Extending the term lowers the monthly instalment but greatly increases total repayment. Choosing the shortest term your income allows reduces the interest burden. Check the costs of early closure or partial payment in the loan contract.
Instalment-to-income ratio
Banks look at the ratio of the instalment to monthly net income; keeping it under 40% is a good yardstick for both loan approval and budget health. Household income, spouse's income and existing debts are assessed together.
Additional costs
Loan allocation fee, appraisal fee, compulsory earthquake insurance (DASK), home insurance and life insurance add to the total cost. The title deed fee for the buyer is about 2% of the price.
Direct instalments or bank loan?
Some projects offer direct instalments of up to 36 months. With direct instalments the deferred-price amount is usually calculated with simple interest, whereas a bank loan uses compound interest. To compare the two options over the same term, you can use the two calculators on our site together.
This article is general information; interest rates and loan terms vary by bank and period.
Stress-test your budget
Before taking a loan, think about the instalment over a year together with your savings and emergency fund. Find out whether the interest rate is fixed or variable and whether instalments are linked to inflation or a reference rate. Read all costs and early-closure terms in the loan contract line by line before signing.
A sample scenario
For a 9 million TRY apartment with a 25% down payment (2.25 million TRY) and a 120-month term, you pay about 177 thousand TRY a month, and total repayment reaches about 21.3 million TRY. If you take the same loan over 84 months, the instalment rises but the total interest cost falls noticeably.