Overview:
Unless you’re fortunate enough to be in a position to buy in cash, you’ll be looking for a mortgage to purchase your Bulgarian property.  Before you dive in, it’s crucial to work out how you plan to pay for everything – not just the asking price of the property itself, but also all the extra costs involved, not forgetting the cost of moving and any necessary renovations.

Bulgarian currency fluctuations can make your home in Bulgaria more expensive. When you buy Bulgarian property, the real cost will not become known until you have bought the Euros needed to complete the purchase. Because the Lev is pegged to the Euro, and Sterling fluctuates against it, your new home in Bulgaria could become more or less expensive during the purchase process.

If you have full funds available it is worth fixing the currency by means of buying it all on a spot contract. You would then hold it on deposit and send payments in Euros.

Many people underestimate the importance that exchange rates can have on their purchase of Bulgarian property. Bulgaria offers some good investment opportunities but the majority of individuals do not make the most of them. They exchange currency at their bank and then transfer their funds abroad. This does not guarantee the best exchange rates or protect against currency risk.

Bulgarian currency is an issue you should familiarise yourself with before committing to buy your new home in Bulgaria. You will find that the cost of most Bulgarian property is advertised in Euros although the Bulgarian currency is actually the Lev (the plural is Leva and it is usually written as Lv on price labels) which is divided into 100 stotinki. To confuse things further, the official code for the Bulgarian currency is BGN.

Since 2002, the Lev has been tied to the Euro at a fixed rate of 1 Euro = Lv 1.955. Sterling and other currencies fluctuate against the Euro, so you need to bear this in mind when entering the Bulgarian property market.

It’s important to carefully consider your options before you commit to anything and you should consult with a foreign exchange specialist or an independent financial advisor who will be able to explain all the different possibilities.  In particular, be sure to check what the setting up expenses and early redemption penalties are exactly as these vary significantly.

Availability:
Property in Bulgaria can be a very different experience for each person depending on personal circumstances, such as using Bulgarian banks for a loan/mortgage or taking a mortgage out on your UK property.

The structure of Bulgarian mortgages are slightly different to that of the UK with a maximum limit of borrowing being 75% of the property value, and then you are personally assessed for your capabilities on repaying the loan based on certain factors that are very different to the UK.

Most people are offered standard repayment mortgages which you pay the capital and the interest through out the repayment process although repayment and interest only mortgages are now being offered by Bulgarian banks. When considering purchasing property in Bulgaria, be sure to enquire about the interest rates and the currency that you will be borrowing the money in, however it is usually in Euros.

A mortgage can be applied for over the phone and takes 1 - 2 weeks, for the whole mortgage process to go through it usually takes in the region of 3 months.

Bulgaria have now joined the EU, mortgages are obtainable by UK and Irish Nationals, for financing improvements for your property, purchasing your property and other purposes.

Bulgarian Repayment Mortgages

• Minimum: €25,000
• Minimum Property Value: €36,000 Maximum: Uncapped (75% of Property Value)
• Term: Max. 20 years up to age 70
• Currency: Euros only Interest Rate:
• Approximately 7.00%

A Proof of income is required to be successful in a mortgage application, some factors that can be taken into account when determining a maximum mortgage are pension, investments, savings, rental income and salary.

Example Repayment

• Mortgage: €70,000
• Period: 20 years
• Interest: 7% Monthly
• Payments: €551.00 capital and interest per month
• Total amount payable: €135,140 including capital, interest, arrangement and survey fees.

Non status/self-certification mortgages are accepted by selected banks usually at a rate of 9.9% - 10.01%, with the correct supporting documents such as pay slips, HM Revenue P60, references and personal bank statements.

Please be aware banks offering non status/self certification mortgages do not take into account any proposed rental income on the property.

Bulgarian mortgages are calculated on your net pay versus your current outgoings and commitments such as any present mortgage repayments, bank loans, credit cards and housing costs. All payments including your new Bulgarian mortgage must not total more than 40% of your net income.

Example: Net monthly income: £2,500

• 40% of Income: £1,000
• Existing monthly mortgage payment: £300
• This leaves a balance of £700 for a proposed Bulgarian mortgage payment. 

It is important to ensure that the relevant documents are available on completion to the bank as the mortgage will only be released for completed apartments once a valid use permission certificate has been issued.

Bulgarian rules state that only Bulgarian nationals are legally allowed to own land although a foreign person may have full rights on an edifice, which means that you may own the title of an edifice without owning the underlying land.

As in the UK, prior to buying overseas property it is strongly advised that you seek legal advice before signing a purchase agreement or placing a deposit on your new overseas Bulgarian home.

To purchase Bulgarian property, you must use an independent solicitor that meets the banks minimum requirements, regarding knowledge of Bulgarian law so that they can act as an agent for service in process. 

Different approaches
At present, it is difficult to find organisations within the UK that will provide mortgages for the purchase of property in Bulgaria. This will change in time, just as it has for other areas such as France and Spain. As an emerging market, Bulgaria has yet to convince the majority of financial establishments that it's a worthy location.

There are a number of approaches that you can take to finance your purchase. By far one of the most popular approaches is to re-mortgage your own home to release the equity. This can sometimes provide a considerable amount of money for investment purposes. Simply contact your mortgage provider and ask them about their additional borrowing facilities (against your mortgage). They will be more than happy to assist you - after all, they will be increasing their own income and stand to gain from your interest payments!

However, if you are not this fortunate or have already spent the money you have released from the equity in your home, you will have to consider other options. Perhaps you can borrow some money from friends or family? You could also consider releasing any money that you may have tied up in shares, savings accounts, ISA's etc.

The other option, although less favourable, is to consider applying for a personal loan. Personal loans are offered by a large number of organizations who compete heavily on the interest rates - with the UK offering rates as low as 6.2 per cent currently.

When considering such additional financial obligations, you do of course need to ensure you can afford the payments (foremost) and that you can reasonably predict a return on your investment that is substantially above the interest rate of your loan. That's easier said than done of course, because none of us have a crystal ball, and can realistically predict the future. But there are market reports produced by well respected organizations that do forecast economic trends in real estate and these can act as your guide when making such important decisions.

Finally, there are overseas mortgage specialists who can organise mortgages in many countries. For example, Conti Financial Services (www. mortgagesoverseas.com) now provide finance options to purchase property in Bulgaria provided that you meet certain criteria.

Summary of Financing Options
In summary, then, you can look at the following sources for generating the money to purchase your property in Bulgaria:

• Your personal savings, ISA funds, premium bonds, fixed deposit certificates etc.
• Your stock market shares.
• A low interest (or no interest) loan from friends or family members.
• Additional borrowing on your mortgage (sometimes referred to as 'flexible loans').
• A personal loan.
• If in a two-car family, the sale of one of the cars (a small price to pay, perhaps!).
• Approaching a Bulgarian bank for a mortgage.
• Approaching a bank in your own country for a mortgage on a property in Bulgaria.
• In extreme cases, when you want to 'live the dream', the cash remaining from the sale of your own house.
• Contacting an overseas mortgage specialist.

Documents needed – General
The documents you will need to submit vary from lender to lender, but as a rule, you will have to supply at least the following:

• Copy of passport and proof of permanent address.
• Certificate of marital status (wedding or divorce certificate) if applicable.
• Bank statements from the last 6 months.
• Pay slips from the last 3 months and a referral letter from your employer.
• Referral letter from your bank.
• Two most recent P 60 tax declarations

Self employed applicants will also be required to supply copies of their most recent tax return.
Documents will need to be legalized according to your country’s official procedure.

Documents needed - Property
The property documents required (from your agents) are as follows:

• Title deeds.
• Preliminary contract.
• Document showing the taxation value of the property.
• Certificate showing the property is free of any encumbrances

Additional documents may be required, depending on which lender you choose.