The current lending situation

The Bulgarian mortgage lending market is in its infancy. Unfortunately rates are sufficiently high to exclude many potential buyers from the market. This market will almost certainly mature, in a few years.

Currently (2006) there are only three banks that are willing to lend money to UK nationals.

Contact us if you require help obtaining Bulgarian finance

Piraeus, a Greek bank was the first lender to enter the Bulgarian market. Their application for acceptance for their mortgage product is a complex task that can easily take up to 12 weeks for completion with a maximum loan to the value of 70%. This product is often hard for the self-employed and low income earners.

If you decide to redeem this mortgage you will be liable for redemption penalties on a downward scale for the first three years. Interest rate is 7% and affordability calculations are quite restrictive. They only take 40% of your monthly net income and deduct your UK monthly payments for personal loans, credit cards and mortgage payments. The amount that is left over is the amount you can commit towards a Piraeus mortgage on a monthly basis.

Another provider to offer a Bulgarian mortgage is Bulbank bank, a large player in the Bulgarian banking sector.

Some of the key elements of the Bulbank mortgage product include:

• Up to 65% loan to value
• 15 year term
• Monthly payment not to exceed 20% of net income
• The property should be ready to use (i.e., not off-plan or in the process of construction) The bank also requires collateral not only by way of a first charge on the mortgaged property but also by depositing in advance 12 months repayments (of principal plus interest) in a Bulbank account.

Bulbank recently opened offices in Sofia, Varna, Bourgas and Plovid to offer their new Bulgarian mortgage product specifically aimed at the overseas investor.

The third lender who is less stringent with its terms and conditions is a Hungarian bank called DSK.

DSK entered the Bulgarian mortgage market on 1st July 2005 to actively target the UK population. Their application process is less restrictive and time consuming. They also have a redemption penalty if the mortgage is redeemed before the end of the loan term. The latest news with this Bulgarian mortgage product is that they are reconsidering the terms and conditions for early redemption to attract more clients. Interest rates are similar to the other banks at around 6-7%

When comparing the three providers, DSK is the most attractive Bulgarian mortgage product in terms of lending criteria and set up costs.

Bulgarian Home Loans has exclusive access for DSK mortgage products. They are designed to handle all lending needs for Bulgarian investments. Established in April, 2005, the UK Company is experienced in property investment in the UK,Spain and Bulgaria. Bulgarian Home Loans has also worked in the highest levels in UK financial services. It is anticipated that other Western European countries will enter the financial market with more competitive mortgage products. As the country moves toward the European Union property ownership will become more accessible. The likely effect will be upwards pressure on prices.

Still the best way to raise capital to invest in Bulgaria is by releasing equity from your own property in the UK. Rates are far more attractive and the process is a lot easier than dealing with an overseas bank. When seeking out finance in the UK it’s best to deal with a mortgage broker that has access to all the UK banks’ mortgage products.