trouble getting a mortgage

Jain and Chris · #5 16-07-2008, 07:57 AM

The mortgage situation in Bulgaria has changed significantly this year. Whilst last year, the majority of banks were willing to lend 75% ltv and were not so stringent on credit checks, there has been a marked turnround in 2008.

The banks have been (as all banks would) concerned by the amount of new and continuing construction in some large tourist resorts (Sunny Beach, Bansko..). They know that if they had to repossess the property they would potentially find it difficult to sell quickly - particularly in relation to covering the debt owed to them. Therefore they have drawn in their lending criteria.

This has led to decreasing valuations and even refusing to lend in some specific resorts. In effect they have become more and more risk-averse.

I spoke with Chris Downham of Bulgarian Home Loans, specialist in Bulgarian mortgages to get the most up-to-date information as he met with the Bulgarian banks only 10 days ago.

Those looking for a Bulgarian mortgage at the moment will find they can expect a maximum loan of between 350 to 500 euros a sq.m in some tourist areas. Clearly this may be massively short of the amount that many people require and does not represent a true valuation of the majority of developments in those areas.

We are confident about the future for tourism and associated property in Bulgaria. However, right now the banks are positioning themselves defensively in the short term. This is not at all unique to Bulgaria, this is something being witnessed in the UK and across the world.

Quite probably the short term "gold rush" mentality of UK buyers and Real Estate Agents, plus the developers, contributed to this altering attitude of the banks.

Unfortunately, those who applied for a mortgage last year and have been waiting for the results of their application are now caught between a rock and a hard place as the banks' lending criteria have substantially changed.

We would advise everyone in this situation to contact their lawyers to investigate their preliminary contracts (was there a clause inserted, saying the purchase was subject to a mortgage?) and also to contact a specialist in overseas or Bulgarian mortgages to explore other ways in which finance may be raised.

Best wishes