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Considering a Bulgarian Mortgage?

The global credit crunch has had a dramatic effect on the UK housing market; the phrase “negative equity” is back in the British vocabulary and more people than ever before are being refused a mortgage; ironic considering that only a few years ago, mortgages were pushed with such verve it was possible to borrow four times your income or even rely on your parent’s income. With such tightening of credit facilities in the UK has left many disheartened and the once dreamed of escape to foreign lands like Bulgaria now seems to be impossible. However most international arms of Bulgarian banks now offer mortgage loans to foreigners, making your dream of a carefree life in Bulgaria more of a reality…




New Entrants

Raiffeisen Properties, which is wholly owned by Raiffeisenbank Bulgaria claims that problems on the world markets have not affected mortgage credit in Bulgaria; Raiffeisen Bank has been offering mortgages for foreigners resident in Bulgaria for some time now, however, so strong is the Bulgarian mortgage market that MKB Unionbank (MKBU) only started to offer mortgages to foreign citizens from June of this year. The bank claimed that its new mortgage service was driven by increasing foreign interest in the Bulgarian property market. Maria Ilieva, MKBU Managing Director and CEO said, “The surveys showed that the Bulgarian mortgage market is becoming more and more attractive for foreigners. Besides the traditional big interest in real estate purchases in Bulgaria from UK citizens, we are expecting increased demand from Austria, Germany, Spain and other European countries.” MKBU is not the only new entrant into this market; UniCredit Bulbank has just launched its mortgage product for foreigners and United Bulgarian Bank has just done the same and is offering customers from Canada, the US and the EU long-term mortgage loans. First Investment Bank is also offering mortgages for foreign citizens but the bank has not placed any nationality restrictions on their lending criterion and is offering their mortgages in a choice of three currencies.

Who qualifies and what’s on Offer?

The mortgage market is not as complex as that of the UK or USA particularly in terms of the choice of products available but the application process is similar; mortgages on offer in Bulgaria tend to be sold on a capital and interest basis. Essentially nearly all foreign citizens could qualify for a mortgage loan at most of the international banks. The mortgage amount varies between lenders as does the length but most are offering mortgages up to 100,000 Euros for a 20 – 30 year term. Some banks like Raiffeisen offer them in a choice of currencies namely, Leva, US Dollars or Euros, which gives buyers more choice and the possibility to play the money markets.
Each bank has its own stipulations, but fundamentally, the borrower needs to prove that they have a legitimate income, which is enough to cover your mortgage instalments plus the interest. There are also age stipulations generally the borrower must be over 23 and younger than 65 on the date of the final payment. Banks here usually lend up to 70% of the valuation price, some advertise that they will give up to 90% and others claim 100%, but the incidences of people qualifying for this are rare – you must prove conclusively that your monthly mortgage payments will not exceed 70% of your net monthly income.

The Application Process

You need to set up an interview with the Bulgarian bank of your choice and provide a letter from your bank in the UK along with six months worth of bank statements and evidence of income in the form of payslips and a letter from your employer confirming your employment and salary. You also need to show copies of your last two P 60 tax declarations – if you are self employed, you must also supply a copy of your most recent tax return. Additionally, you will need to provide a copy of your passport and proof of your permanent address. If you are applying for a loan with your spouse you will need to provide a marriage certificate. You may find that some of your documents need to be legalised with an apostille in order for them to be legal in Bulgaria. Your lender will also require certain documents relating to the property you are buying and this may include the preliminary contract, the title deeds, a document supporting the property’s taxation value and a document from your solicitor showing that the property is free of any encumbrances.

Interest Rates and Fees

Interest rates vary somewhat but are generally around 6.95% for Euro mortgages, 8.55% for Bulgarian Leva mortgages and 7.65% for those in US Dollars.

The fees charged by Bulgarian banks are generally low with anything up to 100 lv. being charged to arrange the mortgage. Some banks charge an annual management fee of around 0.3% of the remainder of the loan and others charge an additional 1.5% once the loan is approved. Almost all banks also offer insurance to cover your loan instalments, which covers your mortgage repayments in the event of loss of income.