A Bulgarian Mortgage

Weighing the Options

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.

Lenders

Currently (2005), there are only three banks that are willing to lend money to UK nationals.

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 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. Mr. Alessandro Decio, the deputy chairman and chief operating officer for Bulbank bank began to pursue lending opportunities with the realization that Bulgarian real estate investment was not a fad.

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)

Bulbank recently opened offices in Sofia, Varna, Bourgas, and Plovdiv 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 July 1, 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.

A company named 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.

Return to Home Page