Buying property in Bulgaria with a Bulgarian mortgage
Most Brits who need to borrow to buy Bulgarian property raise the capital against their property in the UK. However, some people may prefer to use a Bulgarian mortgage as a means of securing finance.
How do Bulgarian mortgages work?
If you are borrowing money to buy any property in Bulgaria you should consider whether a Bulgarian mortgage is right for you. The maximum loan-to-value amount lenders offer will typically be 70% so you would need to fund the remainder yourself if you are determined to buy your dream Bulgarian property.
Bulgarian mortgage companies expect to see proof of income of about 15,000GBP and they will only lend money to buy a property in Bulgaria if you have a clean credit record.
Because the eligibility criteria for Bulgarian mortgages are different to those in the UK, it is advisable to apply before you start looking at property in Bulgaria. Another reason to do this is that Bulgarian mortgages can take up to three months to be arranged and steep penalty charges could be incurred if you cause a delay in completion after committing to buy a Bulgarian property.
Bulgarian mortgages usually run for up to 20 years and are offered at a fixed or variable rate (typically 7%). Currently, local banks offer only repayment mortgages for property in Bulgaria but their range of products is expected to expand as the Bulgarian property market grows.
Advantages of buying Bulgarian property with a Bulgarian mortgage
Securing a Bulgarian mortgage against a property in Bulgaria means any UK property you own is not put at risk. If you cannot keep up the repayments, you would lose your Bulgarian property but not your home in the UK.
If you are renting out your property in Bulgaria you may be entitled to offset the cost of the Bulgarian mortgage against income received, so reducing your overseas tax bill.
Disadvantages of buying Bulgarian property with a Bulgarian mortgage
The set-up costs associated with a Bulgarian mortgage are higher than in the UK. A cost of 3-4% of the amount borrowed would not be unusual.
Whilst the range of Bulgarian mortgage products on the market has grown over the past few years it is still fairly limited.
There are also currency issues involved with borrowing money in another currency. Exchange rate fluctuations can impact greatly on the cost of your property in Bulgaria, making it far more expensive than originally planned. Specialist currency advice can help minimise this danger.
Other information concerning Bulgarian mortgages
Before agreeing to mortgages, most banks will insist on a survey being carried out on your property in Bulgaria. A survey will add a further €200-500 to the total price of your Bulgarian property.
Banks will expect to see evidence of buildings insurance before agreeing to a Bulgarian mortgage. They are not usually concerned about life insurance, however.
Before committing to buy a Bulgarian property think carefully about whether a Bulgarian mortgage is suited to you. It may be that UK and International mortgages are better suited to your needs and offer you the best chance of securing your dream property in Bulgaria.
