Mortgages and Foreclosures

If you are a participant in the process of buying property in Bulgaria and for some reason your purchase is not to be financed through your own funds, below you will find a brief description of the process of applying for and granting bank credits to individuals. Although there are certain complications, similar rules apply to foreign legal entity borrowers.

Generally the credit lines at purchasing real estate are not large therefore banks usually abide rigidly by their credit bulletins and general conditions for lending. Larger credit lines are subject to negotiations between lender and borrower. There apply different rules which are not subject to our discussion here.

As a credit applicant your bank is interested in your credit history and current income status at the time of application.

Banks check up with your credit history partially on their own basis (yet you have to submit bank account statements) while your income status is a matter of evidence and approval (providing pay slips, employer statements, etc.).

Your credit history should not cast doubt on your eligibility as a credit holder (it matters all requested and granted loans, repayment, arrears, etc.)

From a financial standpoint, your income as borrower must also allude to the smooth payment of the monthly instalments.

Next, the bank is interested in the market evaluation of the property that will serve as collateral for the loan claim. Banks hire real estate appraisers to make the necessary assessment, which they actually comply with. This assessment should not be less than the requested loan or the bank is entitled to declining the requested amount or insisting on additional collateral.

Therefore, there are three main criteria that determine the banks’ decision whether to grant loan or not: 1) current income, 2) credit history record and 3) evaluation of an expert appraiser on the property that serves as collateral for the loan claim.

Remember banks reserve the right to change interest rates on loans which are not influenced solely by the situation on international financial markets.

Bulgarian banking system is relatively conservative, which determines to some extent its stability. Most often banks grant “consumer loans” or “mortgage loans” that use different assets as collateral.

If you want to finance the purchase of your property with borrowed funds in the amount the whole or a part of the purchase price most likely you will have to sign a contract for a mortgage loan/credit.

In practice you would meet two widely spread terms: “statutory mortgage” and “conventional mortgage”. There are differences between them and we strongly advise you to consult a lawyer. For instance if the property you purchase serves as collateral then definitely the bank will record a statutory mortgage on it to secure its claim.

The conventional mortgage allows greater freedom in choosing both collateral and use of granted credit funds. Provided a purchase money statutory mortgage, funds go directly into the entrepreneur´s/vendor’s account with the sole purpose of paying the purchase price.

If subsequently you fail to meet repayment under your repayment plan the bank will have the legitimate right to realize the value of the affected property.

If this should be your case consult a lawyer to ensure your rights are protected and to perceive different opportunities that the law prescribes in such cases.

Sometimes for various reasons entrepreneurs fail to complete projects. In most cases developers build up with borrowed funds, secured by mortgage encumbrances on the entire project or on certain development units.

If you have purchased and your property is encumbered yet the developer or the vendor is trying to transfer real rights or just the opposite – doesn’t want or is unable to transfer them to you, if your property is subject to foreclosure and enforcement consult a lawyer to defend your rights and fight for your legitimate interests.

Do not hesitate to contact us by calling one of our phones and have a consultation with our lawyers or by filling out our Contact Form.

We shall respond within 24 hours.

We keep you safe from turnovers and guard your interests on the territory of Bulgaria so that you can thoroughly accomplish your plans and reach your goals.

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