Bulgarian Home Loans
Frequently Asked Questions (FAQ’s)

Below you will find the answers to the most common questions we receive about Bulgarian Mortgages and the process.  If you are unable to find an answer to your specific question please contact us at info@bulgarianhomeloans.com   If you would like to take a look at our video which describes the whole Bulgarian Home Loans Mortgage Process

1) Introduction

2) Engagement

3) Application

4) Legals

5) Completion

Answers

Introduction

a) How long does the whole mortgage process take?
The average time a mortgage takes to complete is 16 weeks. We recommend that you allow at least this amount of time to process your mortgage. We have completed some mortgages in less than 12 weeks, however some have taken longer than 20 weeks.

b) My property has gone up in value whilst being built.
Can I obtain a loan of a higher value because of this?
No. All loans will be based on market valuation or purchase price, whichever is the lower.

c) Mortgage Products

• What are the interest rates?
  All products have slightly different rates and fees; Please click on various bank names for examples; Raiffeisen, DSK, Piraeus, InvestBank, Bulbank, UBB as a rough figure, interest rates range between 6.7 and 10%.
  
• What will my mortgage repayments be?
  Please click on Mortgage Calculator; all banks are listed and you are able to calculate your own repayments
  
• Are the mortgages interest only?
  Some banks offer 1 year interest only at the start of the term, Piraeus’ Interest Only product offers a ten year term, however in the main part Bulgarian Mortgages are repayment (capital and interest) mortgages.
  
• Can I have multiple mortgages?
  Yes. Providing your affordability is sufficient to sustain more than one mortgage.
  
• Does my spouse need to be included in the application?
  Yes. It is Bulgarian Law to include your spouse on your application. This can either be as a co-debtor or simply a spouse.
  
• Can I release equity from a property fully owned in Bulgaria?
  Yes. There are 4 mortgage products on the market which will allow you to do this. The terms are generally shorter and the interest rates a little higher. For details on re-mortgage products, please click here.
  
• Can I swap mortgage providers?
  Yes. To switch an encumbrance (mortgage) you will more than likely incur penalty fees (Redemption penalties).
  
• How long can I have a mortgage for?
  The maximum term for a mortgage in Bulgaria is 25 years. Most lenders insist that your mortgage is complete by the time you reach 65, however some lenders have no upper age limit.
  

d) How is tax situation affected by purchasing in Bulgaria?
As per UK tax agreements with Bulgaria, any income received from renting your property over and above your interest payments will incur Bulgaria tax at a maximum rate of 24%. Any capital gain made in Bulgaria can incur up to a 24% bill in Bulgaria, and when you bring it back to the UK, you will have to pay up to 40% on the gain. For full details please ask your accountant. Many other countries have similar double taxation agreements with Bulgaria.

e) How many people can be part of the mortgage?
A maximum of 4 applicants with most lenders, however some lenders will only allow 2 people to apply.

f) Can I apply as a limited company?
Yes with some lenders, however this severely reduces the number of options you have. 2 mortgage products are available to limited companies; Piraeus and InvestBank

g) How can I contact Bulgarian Home Loans?
Feel free to email us @ info@bulgarianhomeloans.com or call us in the office on 0845 456 7148 or if calling from outside the UK +44(0)114 2506161.

Back to Introduction

2) Engagement

a) Is the engagement fee I paid to obtain a solution for lending refundable?
If we are unable to provide you with a financial solution to purchase in Bulgaria you would be entitled to a full refund. If you are simply un-happy with your options for financing or choose not to proceed with the purchase then the engagement fee is non refundable. Please refer to our Terms of Business

b) I am short on time. Do you offer alternative finance options?
Yes. Through our sister company Simplicity Financial and other associated secured and un-secured finance providers we have a solution for almost everybody.

c) I have paid £200 and provided financial details and a credit report. How long will it take to receive my solution?
In most cases you will receive a financial recommendation within 2 working days of submitting all of the details. In some more complicated cases, we are reliant on lenders coming back to us. In extreme cases a decision could take up to 7 working days.

d) My property will not be completed for 12 months. How long is a solution valid for?
The solution is valid for as long as your circumstances and the mortgage product remain un-changed. Should either situation be altered, we will obtain a revised recommendation approximately 16 weeks prior to when you require the funds at no extra charge.

e) I wish to proceed with your service.

• How can I pay?
  You can pay via credit/debit card over the phone, via cheque (made payable to Bulgarian Home Loans) or transfer the funds online. Please ask your advisor for bank details.
  
• What do I need to provide for a solution?
  You need to provide an online enquiry, providing us with a copy of your latest credit report from either Equifax or Experian and paying the initial £200 engagement fee.

f) Why do I need to pay up front?
Due to the mortgages usually taking 16 weeks to process and each application taking more than 40 man hours to complete, Bulgarian Home Loans needs to charge brokerage fees to supplement the commission we receive from the bank. As much of our work is done prior to an application reaching the bank we need to charge upfront brokerage fees to service the requirements of submission.

g) My property will not be finished for 18 months.

• Can I engage prior to purchasing?
  Yes. This is encouraged as it will allow you to indentify a realistic budget for purchasing and provide you with a full understanding of the procedure.
  
• Why should I engage your services now?
  You should engage our services now as this will lock the fee structure in place as well as offer you the confidence to continue with your purchase knowing that a financial solution is available to you.

h) I want to know if my property can be purchased using a mortgage?

• How do I find this out?
  There are 2 parts to this process;
  Firstly you should engage our services to make sure there is a lending solution available to you. We will then provide you with a mortgage annex which protects you as buyer. There will be a separate agreement between you and the vendor to say that they understand you are getting a mortgage and will co-operate and assist with the process.
• How much will this cost?
  Some of this will fall under the initial £200 engagement fee, however more than likely you will need to instruct our Legal service at a further charge of between £720 - £840 per property. Please see BHL Legal Services for more info.

Back to Engagement

3) Application

a) I have sent in the list of items requested from me. What is the next stage of the process?
Our processing team will review your application within 2 working days of it reaching our office. Subject to our approval (i.e. all documents being present and correct) your developers and solicitors will be contacted to say that you are applying for a mortgage and the process of gathering developer documents specific to your property can begin. This process can take between 1 week and 2 months depending on third parties’ involvement. Following receipt of all developers’ document, you will then be asked to submit up to date income proof.

b) I am concerned that the process may be taking a little too long. What can I do to speed up the application?
There are a few ways you can help;

• Please respond to our requests for up to date information in a timely manner.
  
• Check your emails regularly and return missed calls from our office.
  
• Please remember that all requests from us come directly from the lender; questioning the need for such items will not be helpful.
  
• You may wish to contact the third parties (your solicitors and developers) independently to register their assistance in expediting the mortgage process.
  
• Please let us get on with our job. Phone calls requesting continuous updates hinder the progress of
  your application, not help it. We will update you accordingly when there is a change in status with your application.

c) What documents will I be asked to provide during the process?

• 6 months bank statements
• 6 months pay slips or last 2 years self assessment tax returns for self employed people
• Copy of your passport(s)
• Employers reference
• Full credit report with rating
• Signed preliminary sales agreement
• Completed application forms
• Completed contact details form
• Utility bill from the last 3 months

• Do they have to be originals?
  Please send us the originals, we will certify them and send the originals back. One lender, DSK requires sight of the original documents.
  
• Will I need to provide some items more than once?
  Some items will need to be provided more than once; credit reports with scores, bank statements and pay slips are frequently requested on more than one occasion by lenders.
  
• I have never needed these in the UK. Why do I have to provide so many documents when I am only borrowing £40,000?
  Please remember that verifying foreign income can be a long and drawn out process. Bulgarian Banks do not have access to the same credit agencies as UK lenders and cannot be given the same security over foreign assets. It is also important to remember that Bulgarian Banks are about 20 years behind ours. Can you imagine how complicated it would be for a Bulgarian national to get a mortgage in the UK 20 years ago? Furthermore, although £40,000 is a small mortgage to most UK property owners, this is well above the average for a Bulgarian national to purchase a property and hence the underwriting process is exhaustive.

d) I sent the application in 3 months ago. Why hasn’t my mortgage completed?
Part of the application is always dependent on third parties. During the mortgage process, applications involve your developer, your solicitors, your sales agent, the lender, the local municipality representatives, and of course Bulgarian Home loans. Each group has an important role to play during the process and there can be many delays. The estimated time a mortgage application is 12 weeks from when it arrives at the lender. Only once 15 documents (lender dependent) have been collected by Bulgarian Home Loans, can applications formally be submitted to the lender. Please refer to the Video at this point for further details regarding the application process.

e) I am self employed and cannot prove income, how can I continue?
Please inform us straight away. If your stated income cannot be shown via a UK Tax return or equivalent it can not be used to verify income. We will have to look at firstly what you can prove and if insufficient, look further at self-certified options.

f) I have been asked to send in another credit report. Why does the bank need another credit report when my details haven’t changed?
Lenders regularly change credit and overdraft limits without your knowledge. Such changes can affect your affordability calculations with the bank, and hence your likelihood of being approved for the loan. In addition even if none of your details have changed at all, this must be demonstrated to lenders in black and white. This does happen in the UK, however banks simply access shared credit details and hence do not need to ask for an up to date report.

g) I have already signed my sales agreement, do I still need a solicitor?
Although not required by law, it is very, very strongly advised. Bulgarian Home loans insist on clients having legal representation for signing at the notary and assistance with the mortgage completion works.

h) Why do I have to sign this Power of Attorney? I have already done this for my solicitor.
BHL will issue you with a Power of Attorney (POA) document giving a member of BHL the authority to sign your mortgage contract with the bank and open a bank account on your behalf. All Bulgarian lenders insist that mortgage contracts are signed in this way. Your solicitor will provide you with a separate POA document which gives them the authority to sign your Notary Deed and complete the transfer of ownership.

i) I understand there are some further fees to pay now, what will I be charged at completion by the bank?
Bank completion fees range between 1% and 2.7% of the loan amount dependent on the lender.

j) My application seems to have been at the bank for a while. How long will my valuation take?
Some valuations are completed within a week, most take about 4 weeks, however some have taken as many as 8 weeks. It depends on lender, branch and current workload of the bank.

k) How do the banks arrive at their valuation figures?
The banks will always lend a percentage of what they feel they could sell the property to the local market for in the event of an enforced sale (repossession). It is worth noting that valuation figures do not include common areas, furnishings or additional facilities. They are usually based upon a location and € / sqm. Quality of build is also taken into consideration. We are unable to contest any valuation from our lending banks.

l) I’ve recently changed job; how will this affect my application?
Please tell us about any change in your circumstances straight away. Most lenders insist on applicants being employed in the same position for more than 6 months. If you do not fall into this category we can look at self-certified options.

m) Why do I need life insurance as part of my mortgage application?
Should you die during the term of your mortgage you will still be indebted to a Bulgarian bank. As Bulgarian Banks will not have direct contact with your next of kin they insist that a life insurance policy will cover the debt outstanding. For the cheapest quote possible, please contact your BHL advisor to arrange an appointment with a qualified UK protection adviser.

n) I’m not sure what is happening with my application now. How can I get an update on my mortgage?
For an update, please follow this link and enter your case ID. If you require further details, please contact info@bulgarianhomeloans.com and we will provide you with an update within 2 working days.

Back to Applications

Legals

a) I understand that Bulgarian Home Loans offer legal services.

• How much does this service cost?
  Please see BHL Legal Services for more information.
  
• When do I need to pay this?
  You need to pay this when you submit a mortgage application/engage in our legal service.
  
• Why do I need a solicitor?
  You need a solicitor to assist in gathering necessary property documentation, preparing marital, tax and money laundering declarations as well as representing you in front of a notary via “Power of Attorney”
• What is covered by this service?
  Please click here for more details
  
• Who do I contact?
  legals@bulgarianhomeloans.com or ask your advisor.
  
• Are additional services offered?
  List of combined services includes – document preparation, engagement, declarations, fee calculations, representation, translation, notarising/apostilling service, contract clarification, bank account setup, company setup, and tax return.

b) I have heard a term “Notary transfer”.

• What is the notary transfer?
  The notary transfer is the term for exchanging property deeds from the seller to the buyer. This occurs in the municipality office where the property is located.
  
• When is notary transferred?
  The notary transfer occurs following the mortgage contract being signed and prior to the funds being released.

c) Why is the amount declared on my notary deed different to how much I paid for the property? It has been common practice in Bulgaria to under-declare the purchase price on the notary deed when selling a new build property. This practice decreases the amount of VAT paid on the property (often to make the deal look more attractive to a potential purchaser). Some ways of doing this are reasoned and legal, others are less so but please a bare in mind that all variations affect the mortgage you are applying for not to mention capital gains in the future. Please see below for a simple explanation. Current directives from the EU are aimed at eliminating this practice altogether.

Fully-Declared Situation

Property Price without VAT €100,000 + 20% VAT = Purchase price €120,000. As this property has had the correct tax paid on it, the notary deed will display a price of €120,000. In 10 years time, this property may be worth double the amount €240,000
Capital Gain = €240,000 - €120,000 = €120,000 (This is the figure you will pay tax on)

Under-declared Situation

Property price without VAT €100,000 + (20% of €50,000 VAT = €10,000) = Purchase Price €110,000. As this
property has had the incorrect tax paid on it, the notary deed will display a price of €60,000. In 10 years time, this property may be worth €240,000.
Capital Gain = €240,000 - €60,000 = €180,000 (This is the figure you will pay tax on despite the actual gain being only €130,000)

d) I have read on a forum that I need to go to Bulgaria during the process. Do I need to go to Bulgaria to complete the purchase?
No. This can all be done via “Power of Attorney”

e) Legalizing of documents.

I have been told I need to get some declarations legalized.

• How do I get documents legalised?
  Any POA must be either taken in person to the Bulgarian Embassy or taken to a Notary Public for witnessing and can then be forwarded to the Foreign and Commonwealth Office for further legalisation and apostille. Declarations prepared by your BG representative solicitor can be processed in the same way as your POA, or can be witnessed by a UK practicing solicitor in place of a Notary Public and then apostilled by either the FCO or Bulgarian Embassy. Please remember the offices are in London and you will have to make an appointment.  If this is not workable we offer a unique service that will allow for the correct legalisation of your documents with the Foreign and Commonwealth Office.
  
• These documents look confusing. What do I do with them and where do I sign?
  
• Do declarations expire?
  Yes. All declarations expire on the 31st of December in any given year.
  
• How much will this cost?
  We charge £94 for 1 document, £182.13 for 2 documents, £235 for 3 documents and approximately £50 per extra document. (All prices are inclusive of VAT) If you choose to visit the Foreign and Commonwealth Office or the Bulgarian Embassy it will cost approximately £27 per document.
  

Back to Legals

Completion

a) I know I need to pay my mortgage.

• How do I pay my mortgage in Bulgaria?
  We suggest using a regular monthly payment scheme via a currency broker. Our chosen partner is Moneycorp, please click here for details. It may be worth considering paying 3 – 6 months payments in advance if possible to reduce the cost of transferring funds.
  
• When is my repayment date?
  This will not change. This will be the same day, every month, as when you made your first mortgage payment. For details, please email completions@bulgarianhomeloans.com. Once you have the details please keep them safe in an appropriate place.
  
• Will I get bank statements?
  You will receive bank statements upon your request. We recommend that you request these quarterly.
  
• Can I bank online?
  Some lenders will allow this and others are still setting up the procedure. For further details please email completions@bulgarianhomeloans.com

b) I thought the developer should have been paid by now. How long will completion take once the notary deed has been signed by my solicitor?
This can take up to 1 month as there are 9 steps which follow the signature of a deed and is dependent upon 3rd parties and local municipal offices.

c) My mortgage requires building and contents insurance.

How do I arrange this?
Please contact completions@bulgarianhomeloans.com for a quote within 1 week.
How do I renew?
Please contact completions@bulgarianhomeloans.com for a quote within 1 week.

d) The bank is asking me to pay mortgage payments to open my account. Why do I have to pay up to 6 months mortgage instalments in advance?
The banks use these payments as a “safety deposit” in case you are in delay of any payments. Rather than starting proceeding for repossession, the bank could draw down against these payments. You would then be required to top these back up. The instalments will fund the final months of your mortgage.

e) I now own my property and am paying my mortgage regularly. When will my relationship with Bulgarian Home Loans cease?
As we are required to provide your bank statements our relationship will last as long as your mortgage in the current situation. After the 1st year of your mortgage we will require a monthly (£5 per month) annual (£50) payment to maintain your bank accounts, to offer updated account balances and to provide quarterly statements. Should the banks wish to deal with their clients directly in the future, our relationship can then end.

f) What happens if I miss payments?
If you miss a mortgage repaymen there will be relevant penalties charged. Should you miss more than 2 repayments in a row the bank is entitled to begin repossession procedures. We will inform you fall into arrears, however we will rely on you to respond swiftly to resolve the situation.

g) I would like to release some funds from Bulgaria. Can I re-mortgage my property to release equity?
Yes, there are several lenders who will assist with this, for details click here.

h) At what point in the process do I receive my notary deed?
You should receive the notary deed from your solicitor within 3 months of purchase. Most solicitors will translate this
into English for you at a small charge.

i)I am having trouble renting my property.

• Can BHL help me rent my property?
  Yes. For details click here.
  
• Can BHL help me sell my property?
  Yes. For details click here.

Back to Completions