Home > Blogs > Finance Watch Bulgarian mortgages – get ready to jump through hoops AND be pleased that you have to! I’m just back from a financial fact finding trip to Bulgaria – and most interesting it turned out to be. I’d like to share some details of the products available in what is a new market for PS. But first, I'd like to offer my impressions of this mortgage market because I think there are two very important factors that investors need to appreciate. ONE: This is not going to be the simplest market in which to get finance arranged – loans are definitely there, but investors are going to need some stamina! TWO: This is actually excellent news! Let me explain. I really like the fact that the banks we visited are relatively cautious about lending to foreigners – they’re certainly clearly ready to do business, but they’re not falling over backwards to grab that business. Reassurance To me, this is reassuring because it very clearly separates the kind of hype and marketing frenzy that has surrounded so much Bulgarian coastal development (our views on this are fairly well known) And, while I know some investors find the bureaucratic mortgage application hurdles a pain in many of our markets – my view is that cautious banks considerably lower the risk profile of a market. So, while I think it’s important that investor expectations are managed here, I also think it’s important to see the upside. It’s a young market – in the cities anyway – but this caution from the banks tells me that they are not going to get swept up in a lot of hyped excitement when the market starts to enter its very strong growth phase – which is very soon. While I found the attitude of the banks to be fairly unexcited, they were certainly professional and thorough. Allow time Anyone going into this market will need stamina and they’ll need to prepare their application for finance carefully – it WILL get processed, but you’ll need to allow time. And where you might normally expect to supply maybe five documents, here it might be 20! Be warned – but also be reassured. My advice would be to start your application process some three to six months before you’ll need the loan – no longer than this, though, or you’ll run the risk of your application documents being too old for the bank to accept. So, what can you realistically expect in the way of finance in Bulgaria? Realistically, I think we’ll see LTVs of about 70% being offered. And at rates of around Euribor plus 2.5%. Some banks talk of 80% LTV, but I’m sceptical. I think, when you look across the board – and when you get down to the actual details – 70% is the norm – at least at the moment. Typically, banks will only lend money at the stage referred to as Act 15, which is when a unit is completed and receives a construction stamp of approval from the authorities. Most importantly, Act 15 is about two months before you’d expect to complete. This means then that stage payments can’t be financed. What the banks want The banks seem to place most weight on an applicant’s tax declaration – for UK taxpayers, the P60. You’ll also need six months worth of bank statements and you’ll probably need to provide your own credit search from Experian or Equifax, the cost of which is negligible. The main cost is generally for a ‘Management Fee’ - around 1.75% of the total mortgage amount. Other costs are normally minimal: • A valuation fee – again a nominal sum of around £35 • An application fee – of some £18 And another vital expense is that all borrowers are required to have a representative in the country who is a Bulgarian resident. This is for correspondence and as a point of contact. The obvious candidate for this is your lawyer and my understanding is that the charge for this service is generally not large. So, what about the self-employed – any chance of a mortgage for them? Well, I think the answer is, ‘Yes, for sure’. There are products built around applicants with ‘non-proved income’. But expect a few more hoops to jump through if you’re in this category. New products What was interesting to me is that there clearly are some innovative products coming to market – for example, we came across banks offering a so-called ‘grace period’, which amounts to up to 12 months payable at interest only. Obviously, though, the best advice here – as always – is to check the small print! In conclusion – it’s not easy, and a mortgage applicant is going to have to stick it out – but that is the price you pay for highly desirable bank caution (especially in the current financial circumstances) and also the price for taking advantage of a young market that has not yet experienced the exceptional growth it is going to do. Debbie Le Goff Head of Legal and Business Affairs Links: Sofia, so Good , Flight to Safety POSTED BY DEBORAH LE GOFF ON SAT 29TH SEPTEMBER AT 23:14 GMT TAGS: Financing & Mortgages, Financing & Mortgages, Bulgaria Property [ Back To Blog Home ]

CONTRIBUTORS Robin Bowman Deborah Le Goff Anna Grybel-Kloc Noreen Lucey Nigel Hodges Brett Tudor First Name Last Name Email  BLOG POSTS Sep 2008 Aug 2008 Jul 2008 Jun 2008 May 2008 Apr 2008 Mar 2008 Feb 2008 Jan 2008 Dec 2007 Nov 2007 Oct 2007 Sep 2007 Bulgarian mortgages – get ready to jump through hoops AND be pleased that you have to! Welcome to FinanceWatch - What to watch for in CEE markets  DISCUSS Comment On Blog Post  BOOKMARK THIS Del.icio.us Stumble It! Digg This Facebook Reddit

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