Buying a new property in Bulgaria - financing your Bulgarian property
Before you start seriously looking at Bulgarian property you need to be brutally honest with yourself. Can you really afford a villa, chalet or apartment in Bulgaria? Would owning two homes stretch your finances too far? What if the UK´s housing market dived and ate into your equity? If you chucked in your job and invested all your savings in a new property in Bulgaria, what´s your fall-back position?
You do not want to jeapordise your family´s assets so think carefully about what you are looking for and how much it will cost you. Do not simply accept the asking price of a property in Bulgaria. Do your research and find out what other costs are involved in buying Bulgarian property.
Arranging finance for property in Bulgaria
If you are unable to buy outright but remain determined to buy Bulgarian property you must think about how to finance it. Buying property in Bulgaria - where different legal and banking systems operate - is a huge financial commitment. For this reason you should seek professional advice at all stages of the process.
Most buyers take out a mortgage as a way of securing the funds they need to purchase their dream villa or apartment in Bulgaria. The biggest question they face is whether to do this through a UK-based broker or a foreign lender. Our service directory can help you find UK and Bulgarian mortgage lenders and finance brokers
A Bulgarian mortgage on your Bulgarian property
Lenders will not usually offer more than 70% of the value (not cost) of the property in Bulgaria over a maximum 20-year term. Only three Bulgarian banks are actively involved in the mortgage business but a few specialist mortgage companies have successfully established in the last decade. You will probably find your estate agent or developer can arrange a mortgage for you, especially if you are buying an off-plan villa or apartment in a Bulgarian resort. Currently there is little distinction between the mortgage products available for property in Bulgaria. Lenders offer a choice of fixed or variable interest rates, mostly settling at 7%.
All lenders will expect to see a clean credit record and proof of a minimum income of about 15,000 GBP.
Using the Bulgarian property as security on your loan, the banks would not be able to seize your UK assets, even if you default on the loan.
Buying Bulgarian property with a UK mortgage
A mortgage must be secured by property in the same country. Therefore, to fund your villa or apartment in Bulgaria with a UK mortgage, you have to release equity on your UK home.
Most lenders will allow between 75 and 96% of the value of your home to be released to allow you to buy a Bulgarian property. More products and flexibility exists within the UK market, and both interest rates and set-up fees should be lower than in Bulgaria.
Currency fluctuation - a risk to your property in Bulgaria
You should not underestimate the impact of Bulgarian currency issues on the affordability (or not) of a property in Bulgaria. The risk can be considerable. For example, if you are buying an off-plan apartment in Bulgaria, you should be able to roughly guess the amount of Sterling you will need for your Euro deposit next week. But how much Sterling will you need when the final Euro payment is due on your Bulgarian property in 18 months? And how will this effect your mortgage payment budget?
