The Bulgarian real estate market attracts foreigners from near and far abroad primarily by the price level. In addition, mortgages in Bulgaria are available to foreigners. For local banks, it does not matter where the potential borrower came from: both citizens of EU countries and Russians are given loans by financial institutions on equal terms. Of course, Bulgarian citizens can count on more attractive lending conditions, but the difference is not as significant as in other countries.
General information about the Bulgarian real estate market
Real estate in Bulgaria has been in the top among buyers from Russia for the past 15 years, along with real estate in Spain. Nine out of ten buyers are looking for cheap properties worth up to 50 thousand euros.
In 2018-2019, housing in Bulgaria is a profitable investment, even if you buy real estate on credit. From 2009 to 2021, prices in the market fell by 48% in aggregate and averaged $ 442 per sq. M.
Today, another round of their growth is observed: from 2021 to 2021, the cumulative increase in average prices exceeded 25%, and they continue to grow. Experts give moderately optimistic forecasts, which is associated with the increase in the number of building permits, the intensification of the process of Bulgaria's accession to the Schengen zone and, of course, the possibility of taking out a mortgage in Bulgaria.
The most dynamic are the real estate markets of Sofia, Varna and Burgas, where the secondary market in 2021 showed an increase in prices by 9.4, 13.5 and 13.4%, respectively. In addition to these cities, sea resorts are attractive, where a small studio a couple of kilometers from the beach can be bought for 10 thousand euros, and for 20-50 thousand euros - a very decent apartment.
Lending conditions for foreigners
During the crisis in the real estate market, Bulgarian banks began to actively attract foreign capital through loans to foreigners secured by real estate. Mortgage lending conditions in Bulgaria for foreigners are, of course, tougher than for local residents.
When registering a mortgage, the type of real estate is not of fundamental importance, preference is given to liquid objects - apartments and houses in tourist areas. Rural real estate is practically not credited - it is easier to get a loan for repairs than for buying a house in a village.
Bulgarian banks are usually ready to give foreigners no more than 200 thousand levs, which is about 100 thousand euros. Considering real estate prices, such a loan is sufficient. But the loan amount usually covers only 60-80% of the cost of the object, the rest of the buyer must pay himself, demonstrating solvency. Plus 15% down payment.
The loan term for non-residents is from 5 to 20 years, depending on the program, the permissible age of borrowers is 20-65 years (60 years for women).
Lending rates vary from 7 to 9.5, sometimes up to 14% depending on the conditions. For example, Unikredit Bulbank is ready to offer interest rates of about 6%.
Unfortunately, Sberbank's mortgage in Bulgaria is not available to Russians, but the bank is one of the financial institutions that provide loans secured by real estate abroad. In addition to Unicredit, mortgages to foreigners are also issued by Alfa-Bank, DSK-bank, Postbank, Bulgarian-American Credit Bank and some others.
For comparison: the average mortgage interest for Bulgarians, although higher than the average rates in Europe, is below 4%.
Please note that the rate can consist of two components: a fixed interest rate and a floating index (SOFIBOR for loans in leva and EURBOR for euros), which can either decrease or increase this interest. At the same time, a fixed percentage for each client is usually individual.
Early repayment of the mortgage usually involves the payment of a fine of up to 1-3%.
How to get a mortgage in Bulgaria
Mortgages for Russians in Bulgaria are available under programs from 7 banks. The most affordable and simple options in terms of design are buying a home from a developer who, selling housing, already cooperates with one or several banks at once. In this case, the borrower can count on initially loyalty from the lender.
As for the secondary market, in order to buy an apartment on a mortgage in Bulgaria, you must adhere to the following procedure:
- Choosing a suitable property and booking it. You can search for housing both independently and through real estate agencies / private realtors. The most popular portals: Alo, Imot, Bazar. There is no system for licensing real estate agents in the country, so trust transactions only to trusted realtors. Having made a choice, it is necessary to book an object: the buyer transfers the amount for reservation through the bank, usually 2-3 thousand euros.
- Choosing a bank and collecting documents. Conditions in banks are similar, however, it is recommended to conduct a preliminary analysis of offers. The package of documents is usually standard - about it below.
- Applying for a mortgage loan in Bulgaria. The obligatory personal presence of the borrower when submitting an application and its consideration is not required, it is enough to delegate an authorized representative by power of attorney.
- Approval of the application, loan processing. On average, the registration procedure from the moment of choosing a suitable object and until the transfer of the total amount to the seller takes 1.5-2 months. During this time, accompanying procedures are also carried out: real estate appraisal, signing an insurance contract, notarization, and so on.
- Conclusion of the transaction, transfer of money to the seller, re-registration of the property.
How to choose the best mortgage program
Mortgages to foreigners in Bulgaria are usually provided under standard conditions. A quick comparison of several lending programs in Bulgarian banks makes it clear that relatively the same conditions are offered. The key factor is the mortgage rate: the lower it is, the more favorable the terms of the loan are.
But when choosing the right program, keep in mind that:
- firstly, in Bulgaria there is a practice of increasing the mortgage rate in several years in comparison with the initial one;
- secondly, SOFIBOR / EURBOR floating indices can be used. Their use can begin, including several years after the loan is issued.
When choosing a program to buy a house on credit, pay attention to other aspects:
- the total amount of the overpayment, taking into account all rates;
- the amount of the initial payment;
- loan terms;
- the amount of commissions for consideration and for other banking activities;
- possibility and conditions of early repayment.
Before signing a contract, it is recommended to consult with a loan officer.
Package of documents
Buying real estate in Bulgaria on credit, non-resident foreigners submit a standard package of documents to financial institutions, including:
- copies of internal and foreign passports;
- marriage (for married) or divorce (for divorced) certificate;
- certificate of income, as well as tax payment for the last tax period;
- a certificate of salary from work, an extract from the bank on account movements for the last six months;
- an extract from the USRN with information about the real estate owned, as well as about the absence of encumbrances on it;
- a certificate from the credit bureau and, if necessary, a letter of recommendation from the Russian bank, the client of which is the applicant;
- preliminary contract for the purchase and sale of real estate.
The documents are provided in the original, as well as in copies with a notarized translation into Bulgarian.
Signing a mortgage agreement
After approval, a mortgage on real estate in Bulgaria can be issued without the personal presence of the borrower. It is enough to delegate an authorized representative to sign the agreement by power of attorney (with the obligatory indication of the authority to conclude such an agreement).
Please note that a mortgage agreement, as in Russia, requires notarization, the costs of which are also borne by the borrower.
In addition, the contract is subject to registration in the real estate registry at the local registration office (Registration Agency).
Please note that only a person with legal capacity can conclude a mortgage agreement. The total term of the mortgage is 10 years, however, the mortgage lender has the right to extend it upon a notarized application to the registration service.
The contract must contain the main details of the transaction, including:
- subject of pledge;
- the grounds for the claims of the creditor;
- credit amount;
- interest rates;
- conditions for their change, and so on.
Additional expenses
An apartment on credit in Bulgaria is not only the amount of the transaction for the seller and the overpayment of interest for the bank. The borrower will face many associated costs that will have to be incurred both when applying for a loan and when registering real estate in ownership.
So, when registering a mortgage, the borrower additionally pays:
- commission for the consideration of the borrower's application by the bank - in each case individually, but usually no more than 75 euros;
- commission for legal support in concluding a mortgage agreement and notary services - 30-50 euros;
- assessment of one's own creditworthiness - up to 100 euros;
- real estate appraisal - 50-250 euros, depending on the appraisal company;
- account maintenance fee - 3-5 euros per month;
- insurance policy for the property and, if necessary, life insurance of the borrower - 200-300 euros per year.
Additional costs will be required when registering a purchase and sale, including for:
- payment of municipal tax on the purchase of real estate - no more than 4% of the value (usually from 1.5 to 2.5%);
- notarization of the contract - depending on the value of the apartment, usually in the range of 300-1000 levs;
- registration fee - 0.1% of the cost;
- entering information into the real estate register - from 5 euros;
- payment for the issuance of an extract.
Loan repayment procedure
The method of calculating monthly payments must be provided for by the contract. The specificity of the Bulgarian mortgage lending is that the borrower is allowed to independently choose the mortgage repayment scheme:
- annuity, when the payment amount remains unchanged throughout the entire period of loan repayment. Despite the invariability of the amount, the payment structure is constantly changing - first, 80% of the funds go to repay interest on the loan, and at the end of the term - to repay the loan amount directly.
- differentiated, when a gradual decrease in the amount of payments is carried out. Under this scheme, the amount of debt to be repaid remains unchanged, and the interest charged on the remaining debt is reduced.
In case of early repayment, a differentiated scheme seems to be more profitable. But remember that in case of early repayment, many banks introduce a commission in the amount of 1-5% of the total debt.
Obtaining a visa and residence permit for real estate
Owners of real estate in Bulgaria, on the basis of their possession of notarial acts on the purchase of property in the republic, are entitled to obtain a short-term annual visa of category C for temporary stay in the country for 90 days within six months. On the Internet, you can find other information, for example, about the issuance of a national visa of category D, but this is not the case.
On the basis of ownership of real estate, only a short-term visa C is issued. Please note that it is not a Schengen visa and allows you to stay only on the territory of Bulgaria, Romania, Croatia and Cyprus, it is not possible to enter the EU with it.
On the fact of owning real estate, only owners of objects whose property exceeds 300 thousand can obtain a residence permit in Bulgaria. In other cases, in addition to housing, a foreigner must provide one of the following grounds for obtaining a residence permit:
- find a place of employment or be sent on a business trip;
- establish an enterprise or a branch of a foreign company and provide jobs for 10 local residents;
- to marry a citizen of Bulgaria;
- be a family member of the holder of a residence permit;
- enroll in long-term medical treatment.
Conclusion
Buying real estate in Bulgaria on a mortgage for Russians has two significant advantages: the affordable cost of real estate and relatively low mortgage rates. But borrowers will have to incur significant accompanying costs associated not only with the flight, but primarily with the registration of a mortgage loan - any banking actions are burdened with a commission. Even if the borrower decides to save money and repay the mortgage ahead of schedule, he will still face a fine of 1-5% of the loan amount.
