Whilst there have not been any substantial leaps and bounds of late, it would suffice to say that the Bulgarian Mortgage market is seeing small scale progress in pockets, which collectively show the most encouraging signs towards recovery since the start of the recession.
Bulgarian Mortgages in the Domestic Market
Leading the advance of domestic demand is Sofia market, which has inarguably moved away from further decline and shows that prices are marginally up in some areas. Good offers are selling and few in the industry will contest this, distressed vendors are now less in number and the consensus is that those who needed to sell rather than wanted to sell have now sold and left the marketplace. More and more transactions are funded via regular high street mortgages, raised from both foreign and domestic banks by individuals seeking property for residential purposes. Loans to Value are as much as 90% again and thus more of the demand from the buying public can now be followed through with actual sales transactions, as opposed to genuine interest and failed offers as was so often the case over the past 12 months or so.
This is naturally positive news for any owner looking to resell their property as we are no longer entirely dependent on cash buyers only. However, there is still a long way to go; interest rates remain sky high by comparison to other European products, fees are excessive in relation to earnings and the banks remain extremely cautious over who to lend to and which properties to lend against. There is no such thing as a ‘mortgage offer’ that can then be applied to a property of the buyers choice, the buyer must first pay a deposit (at their risk), then pay to have their chosen apartment assessed (at their cost), if approved then they can apply and be considered for financial eligibility. Should you find a ‘mortgage buyer’, it is worth remembering that they are risk a lot to make an offer. The buying process via mortgage can take 12+ weeks and ultimately relies upon a basis of trust between the buyer and the vendor not to collapse the sale during the application period, which often becomes fraught with difficulties and frequently is only held together by the diplomacy and negotiation skills of the agent who is the only party communicating with both sides.
What about Bulgarian Mortgages for Foreign buyers?
Foreigners can now achieve a mortgage for a Sofia property, there is only one bank lending and unlike other ‘offers’ there have been real clients, genuine living and breathing applicants, who have actually received funds following application. This is not a mythical product or an application fee generator, as so many have proven to be. The general criteria is as follows:
- Property must be finished and with ‘Act 16’
- Located within the city limits
- For residential purposes
- Loan to value of not more than 50%
The value against which any offer will be calculated will not be the buying price agreed at the time of purchase, it will be the amount that the bank’s own evaluators decide it to be under current market conditions. Recent experience suggests that typical values across the vast majority of non central Sofia average at around 700-800 Euros / sqm, as such the bank is likely to lend half of this (LTV). In many cases this will only amount to 25-35% of the total value that was agreed at the time of purchase, however this is the only offer available from any bank at the time of writing (January 2022).
The interest rate is 11.95% and the applicant should expect to pay not less than 1,500 Euros in fees to the bank, broker, notary or apostille etc in total from start to finish. A case study example can be seen below:
- Original purchase price 2007: 120,000 Euros
- Bank valuation 2011: 90,000 Euros
- Total size: 113sqm
- Location, City of Gardens, outer Sofia
- Loan amount requested : 25,000 Euros
- Loan amount granted: 25,000 Euros
- Total fees: 1,500 Euros
- Monthly repayment: 231 Euros
- Monthly income from rental: 250 Euros
- Time from initial contact to pay out: 8 weeks
Ski Resorts and Coastal resorts:
Despite the vast majority of lending demand coming from buyers in these areas, there remain no products at all for European buyers. There is one product available to Russian buyers who are considering finished Black Sea properties, however this has yet to be opened up to European clientele. The general consensus is that the above product for Sofia will eventually filter down into the tourist areas and become available to all owners for finished ski properties and alike.
Equity release and re-mortgaging:
Regardless of nationality or location, there are currently no options available for re-mortgaging or any type of equity release.