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Buying Bulgarian Property The Creative Way

For many people it is an extremely difficult time to sell their own home in the UK and buy a property in Bulgaria, despite their desire to do so.

Frequently, houses just aren't selling because the banks have tightened their lending so severely that mortgages are very hard to come by. It's time to have a rethink and look at creative alternative ways to sell, buy and move.

There are ways which allow you to sell your UK home later when prices rise again, yet buy your property in Bulgaria at today's price. Downsize, move upmarket - whatever your choice, you don't have to go through a standard sale in Britain and a standard purchase in Bulgaria.


Quest Bulgaria takes a look at a variety of creative options for buying and selling property in Bulgaria in a three part series covering owner financing, lease to buy and house swapping. This might be just what you are waiting for to speed up the right outcome for you.

What is Owner Financing?

Owner financing is not a new concept. It has been particularly popular in the USA for many years. It is most suitable for those who are selling a Bulgarian property, which they own outright with no mortgage. For example, you may own several houses in Bulgaria and wish to release equity in one or all of them or you may simply wish to sell your current property and move to another.

Whilst many people have lucrative and secure employment in the UK, a lot of folks are just not good at saving hard and consequently they are unable to secure a mortgage for a Bulgarian home because most of the banks demand at least a 30% deposit, which is more than the purchaser can raise. One way around this is for the seller to "finance" the deal. Sellers often shy away from this concept simply because they do not fully understand what it entails or how they can protect themselves should things go wrong. After all, most of us don't sell a property every day and our knowledge is limited to conventional practices involving bank mortgages.

Owner financing works in the following way; the purchaser pays a deposit up front, which is less than the banks require - generally you and the purchaser agree on something in the region of 15 to 20% of the purchase price. After this, you set out monthly loan repayments over a limited period - usually set at five years although the term is entirely up to you. At the end of the period there is what is known as a balloon payment, so named because this payment is the large final sum.

Balloon payment financing is more common in financing commercial property rather than private real estate. A balloon payment mortgage can have a fixed or a floating interest rate; again you the seller decide what best suits your needs and those of your purchaser.

With owner finance you don't even have to finance the whole of the loan. If your purchaser can only get a certain amount of bank financing then you can finance part of the loan. In instances like this the vendor can attach higher interest rates to their part of the loan should they so wish and the purchaser can move this part of the loan to a bank when more comfortable terms are offered there.

Advantages of Owner Financing

There are many advantages to this form of financing. The finance is very quick to arrange because all of the decisions and agreements are made directly between the buyer and the vendor. Additionally, both parties can agree on terms such as the deposit, the loan period, monthly payments and the final balloon payment to create a win-win situation whereby both parties are satisfied with the commitments each has made. The monthly instalments provide a monthly income for the vendor allowing him to take on new projects or boost current income to better afford living expenses. With such an arrangement, the buyer has time to wait for the financial climate to improve so that they may obtain a mortgage from a bank, which will allow them to repay the balloon payment at the end or earlier if the contract allows. It's also worth noting that with this type of finance there are no mortgage fees as there are when you finance via a bank.

From a purchaser's point of view, you do not need to sell your UK home to take on such a mortgage. Indeed you can wait until the UK property market picks up rather than having to sell too low. One way that buyers can afford the monthly instalments is by renting out their UK property and using this income to finance the loan. Bear in mind that property in Bulgaria is much less expensive than in the UK; financing the purchase of a Bulgarian home that requires no renovation can be purchased from about 50,000 Euros - you would be lucky if you could find a property in the UK for this price. The deposit is lower than that required from a bank and with banks becoming more cautious about lending particularly for things ventures deem as speculative purchasers do not have to over-commit to get finance.

The Concerns

The biggest concern is what will happen if the purchaser defaults on their payments. Fortunately, providing you ensure that you have a legally enforceable contract the vendor has all the guarantees a bank would have. If the buyer defaults, then the vendor will have to go through repossession procedures if they give the title deed at the beginning however it is possible to delay giving the title deed until the final balloon payment is received. Whilst no-one wants the hassle of repossession, you will be protected by law if you put the effort into getting a watertight contract. You must get professional help from people who are au fait with owner financing when drawing up your contract. The best way to ensure you do not lose out is by withholding the deeds until final payment is made.

Another disadvantage to this form of financing is the fact that other than the initial deposit you may have to wait five years for another lump sum payment and if you need a large amount of cash in the meantime there is little you can do other than follow the American methods of selling on the loan.