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Taking care of your Bulgarian mortgage

Once upon a time there was a mortgage market for foreigners buying property in Bulgaria! It was during 2005-2008. That was a time of marvellous promises for high ROI from developers, pretty websites of investors impressing with fantastic pictures of long beaches and beautiful nature…

Part of the beaches and the nature are still here, some of the clients too, but the finance has gone (hopefully for short to medium term). Many clients have remain with both a property and mortgage, whilst others are still looking for both! This short story has aims to reveal why a mortgage is like a baby that has 20-30 years time but doesn't grow up, rather diminishes (in value) eventually being paid off: and how the mortgage owner has to take care of it.


Dear client, please do not be like a mother who leaves her child an orphan. The Bulgarian banks do not want to be orphanages!

The most important points regarding a mortgage can be summed up as follows:

Mortgage Documents
Do you have mortgage contract and repayment schedule? Many of you will think what an obvious question this is. Unfortunately, many clients do not have these documents. Please, do request them from your lender.

Interest Rate & Product Changes
After the autumn of 2008 many Bulgarian banks changed/increased interest rates on the mortgage products (some of them have done this more than twice). Due to the language barrier and administrative “discipline”, most the clients have not been informed and have not received their updated repayment schedules.

How does this affect those with a mortgage? Arrears payments have started to increase in numbers. Many clients have defaulted for insignificant amounts of 5-10 euro. The currency and transaction companies abroad who the clients use to transfer their mortgage payments, and who they have signed contracts with, have not been notified of the changes. Even where they have been informed, for the term of the contract agreed it has been difficult for the client to change the former amount stipulated in the contract. This created the need for two parallel transfers of money to the accounts in order to cover the monthly installments. Inform your currency broker immediately if there is a change to the mortgage monthly payment!

Bank Account Statements vs. Online Banking
To take care of your baby means to know when it wants to sleep, eat, play: to know what is going on with him, how he feels. Unfortunately, many clients have not received information on what is happening with their mortgages, whether the payments have been transferred on time, whether they have enough in the account, etc.

This has happened due to the lack of the provision of regular bank statements. As many foreigners bought through an authorised person in Bulgaria (with PoA), the real contact for the bank never got the information.

When I was a student in Germany, at the very beginning when I opened an account I was provided with a small booklet, where I could file all my bank statements. It was very pretty gesture, I thought, as we have not had such a thing in Bulgaria.

It is nonetheless possible to enjoy good after-mortgage service. If you trust your PoA, then they could set up online banking for you, which will allow you to track payments and prevent you defaulting on your mortgage payments.

Annual Management Fee
The annual management fee is not only part of the initial costs for obtaining the mortgage from the bank. With some lenders, it is due every year over the term of the mortgage. The difference is that every year it is calculated on the basis of the outstanding loan amount. Thus, it is diminishing in value. This fee is usually due the month when you first acquired the mortgage. This is often overlooked and clients are sometimes even unaware that this is due every year. Do not have to forget to add this to your transfer for that month your lender requires this to be paid every year.

Property Insurance
Property insurance is required by the lender every year over the term of the mortgage. In many mortgage contracts you will find a specific clause for this. However, you will not find further information as details of any preferred insurer. Theoretically, lenders accept insurance from any insurance company: both Bulgarian and foreign. Practically, some of the lending institutions have special requirements due to internal policy. Therefore, please take professional advice in advance in order not to be in a situation where you may end up paying twice for insurance because your lender wants you to use one particular insurance provider.

There are many cases when together with the preliminary contract for purchase of the property the clients have signed management & maintenance agreements according to which they are obliged to pay an annual fee and the management company will take care of their insurance, mortgage transfers, etc. If this is the case, before signing, ensure you inform your company about the details of your lender, special requirements, etc and to insist the document be sent by courier to the branch where your mortgage is being provided.

Selling Your Mortgaged Property
When selling your mortgaged property, the most important thing (apart from receiving the money for the sale) is to terminate your relationship/mortgage with the lender. The procedure covers the following: you are obliged to hand over a request for early repayment of the loan; afterwards a request for deregistration of the mortgage that is submitted to the Registry agency on location of the property. You may wish also to close your accounts, etc. Your PoA can do this for you.

When I start or unravel the financial affairs or mortgages for foreigners, I try to imagine I have a mortgage in Japan, to understand how a foreigner feels doing this in Bulgaria. The feeling could be summarised: having a relationship with a bank that rarely speak your language, sending emails with no response under the accepted business term of 24 hours, being lost in nowhere and at the top of this: being a brave property owner with a mortgage who would simply like to act correctly even in foreign country.


Despite the current financial crisis across the world and the lack of available mortgages in Bulgaria for foreigners, clients and the banks are still in the marketplace. Frequently, the banks are in Bulgaria, yet the clients 3,000 km away from them - but a bridge can always be made. For foreigners seeking a mortgage in Bulgaria, try and find a person or company who will act as your bridge and take care of your mortgage.

Article written by Magdalena Chaneva of Home Point BG Legal and Financial Services