Monthly interest rate advice needed!

robinsrule

Hi, I am a British citizen living and working in Turkey. I want to buy a house here and have found a long term loan with HSBC Turkey (See link below, section at the bottom entitled 'Monthly interest rates on consumer loans')

http://www.hsbc.com.tr/English/RetailBanking/InterestsFees/

I have scoured the internet but can't find any calculators for monthly interest rate. I am sure it will work out a lot higher than a normal mortgage, but I cannot get a mortgage from a UK company as I am living abroad!

So my question for the clever mathematicians among you is: If I bought a house for 80,000 and paid back the loan at a monthly interest rate of 1.59%, how much would I pay back in total (and per month) over a 15 year period?

nobblyned

That sounds like a heck of a lot. If it compounds it would give you an annual percentage rate of 20.8% !!

robinsrule

Thought it was something ridiculous like that! Any idea how much I'd pay back if I borrowed 80,000 at this rate over 15 years (so 180 payments) - there must be some people who take loans like this or they wouldn't exist!

epz_2

are you paid in turkish whatevers, if you are then you need to worry about exchange rate fluctuations as well, frankly i woulnt be happy exposing myself to that level of risk.

well maybie if i had done more research and seen long term currency predictions and was doing it against some low interest rate economy like japan which would have a negligable interest rate on the loan.

DeepSporran

On the same HSBC site, look at:

http://www.hsbc.com.tr/English/RetailBanking/InterestsFees/Calculate.asp

if you choose Credit type 'Mortgage'
Amount of credit '80000'
Credit term ' 360 months;

and leave monthly Paymount Amount blank.

Click the 'Calculate ' button.


The monthly payment comes out at 1,339.05

Multiply by 360 and the answer is ...... 482,058 for the total paid over 15 years


This sounds like a lot (and of course it is!)

However, you need to take into consideration the current inflation rate in Turkey which was 0.95% PER MONTH in the month of January 2007, with a year-on-year figure of 10.1 % (source : http://www.turkisheconomy.org.uk/news.htm).

So although the interest rate is very high, after inflation it's not so ridiculous.

Generali

The interest rate in Turkey is high because Turkey has been such a fiscal basket case over the years so people (individual Turks as well as Nasty Big Bank Investors) need a big reward for taking the risk of holding Turkish Lira.

The old Turkish Lira (TRL) was about 10 to the Pound in 1956. When it was rebased in 2005 (i.e. 6 noughts were knocked off the old currency) a shiny pound coin would buy you TRL 2,400,000.

The TRL fell so reliably that there used to be a tax avoidance scam whereby your boss lent you TRL interest free and you paid him back a year later. You made the amount of the currency depreciation!

As the banks need to pay the market rate to borrow the money they are going to lend to you they will have to charge you whopping great rates to make up the difference.

If you are earning in a ccy other than New Turkish Lira (TRY), get a mortgage in that currency. The TRY has fallen so reliably over the past 50 years that I don't think the currency risk is that great, especially once you factor in the 15% discount on the interest rate!

However, if you earn TRY you are experiencing exactly why economies that have a bad fiscal or monetary history stay poor. If you are a company or an individual earning TRY (or Argentinian Pesos or Brazillian Reals or whatever) and you want to invest by borrowing money, you can't afford to due to the sins of the past.