Until recently, Bulgarian banks would only lend to Bulgarian citizens, but recently these restrictions have been relaxed. Not all Bulgarian banks will lend to foreign citizens, however, so you will have to shop around. Mortgages are not generally available if you are buying land alone. You might decide to use the services of a local mortgage broker, who can assist with the process of applying for and finalising of the mortgage.
Interest rates in Bulgaria are currently higher than in the UK. The maximum loan term is usually 20 years. As in the UK, you can pay back the credit earlier, but there may be penalty charges.
The maximum size of any loan tends to be around 70 per cent of the value of the property. You will have to make up the remaining deficit.The bank will use
Until recently, Bulgarian banks would only lend to Bulgarian citizens, but recently these restrictions have been relaxed. Not all Bulgarian banks will lend to foreign citizens, however, so you will have to shop around. Bulgarian Mortgages are not generally available if you are buying land alone. You might decide to use the services of a local mortgage broker, who can assist with the process of applying for and finalizing of the mortgage.
Interest rates in Bulgaria are currently higher than in the UK. The maximum loan term is usually 20 years. As in the UK, you can pay back the credit earlier, but there may be penalty charges.
The maximum size of any loan tends to be around 70 per cent of the value of the property. You will have to make up the remaining deficit. The bank will use its own valuer to value the property. The valuation may be (and in most of the cases is) different from the purchase price you have agreed to pay.
The most important thing to bear in mind when arranging a mortgage is that it can take 4-6 months from start to finish to complete the process. Unfortunately in Bulgaria it is not possible to apply for a mortgage until you have selected a Bulgarian property to buy. This presents a big problem, because most sellers expect a deal to be completed within two months. You will have to make sure you inform all the people you are dealing with of your intention to apply for a mortgage (the lawyers, agent and especially the seller). There is nothing more frustrating for all involved if you find a property and then the seller refuses to wait for you to apply for a mortgage.
If you chance your luck and sign any contracts (discussed in more detail below) before your mortgage has been confirmed, it is advisable that you ensure there is a clause in the contract that states that the purchase depends on a mortgage and that, if no mortgage is provided, the agreement is cancelled.
Other Loans
Sometimes it is not necessary to take out a mortgage. Suppose a buyer intends to move to Bulgaria permanently. They have already paid off their UK mortgage and their UK home is on sale. They have found the perfect place in Bulgaria and have, say, £80,000 of the £100,000 available from savings and pension lump sums. The balance will be paid from the sale of their UK home but they are not sure whether that will take place before they are committed to the purchase of the house in Bulgaria in a few weeks’ time. It is probably unnecessarily complicated to mortgage the UK home for such a short period, and indeed, it could be difficult to do so if the bank knows you are selling and if you are, say, 65 years old and not working. In this case it is often simplest to approach your bank for a short-term loan or overdraft. This might be for the £20,000 shortfall or it could be that you don’t really want to sell some of your investments at this stage and so you might ask for a facility of, say, £50,000.
Some people choose to take out formal two- or three-year UK loans for, say, £15,000 each while still resident in the UK, before leaving for Bulgaria, to cover a gap such as waiting to receive a pension lump sum. Despite the high interest rates on such loans, the overall cost can be a lot less than taking a short-term mortgage on the Bulgarian property and paying all the fees relating to it.
Who Should Own the Property?
Until Bulgaria became a member of the European Union there were restrictions on foreigners owning land, which meant they had to register a company own property with land in Bulgaria. Now there is a set deadline after which everyone will be allowed to own land in Bulgaria as a physical person and that deadline is 2014. According to the contract between the EU and Bulgaria, it is now permitted for EU member state citizens who are legally residing in Bulgaria to buy land. After five years, EU member state citizens will be able to buy property with land irrespective of whether they reside in Bulgaria. This is a very significant change. In principle it implies that if you are intending to reside in Bulgaria then you can buy property with land now (if you are an EU member state citizen) but not for five years if you will be residing outside Bulgaria (i.e. if you are buying a second home). Although this agreement is now in place, the institutions and all those involved in the process of real estate transactions (notaries, lawyers and estate agents) are still debating among themselves how this agreement is to be implemented in practice. You are therefore advised that if you buy property in Bulgaria you should discuss this issue further with your lawyer, and hopefully the confusion about the implementation of the agreement will soon be settled.
The different ownership methods have significant implications in terms of the process of buying the property and the taxes you might face.
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