What do we need to know about Mortgage loans?
Banks offer various loans for the purchase of real estate on the Bulgarian market – apartments, houses, villas, studios, offices, plots for building single-family houses, etc.
You can get an idea of what kind of loan you can be approved for from the following information:
The maximum loan amount depends on two interconnected factors.
- The type and condition of the real estate;
- The income of the loan applicant;
It is important to know that if your income allows for a relatively large loan amount, but the property does not have the same value, you will receive a loan based on the value of the property. And vice versa, if the property appraisal is high, but your income does not allow for such a large loan, you will receive a loan based on your income.
It is important to distinguish between the purchase price of the property and its market value. The bank is not so interested in the purchase price when determining the size of the loan, but rather in the market value, which is determined by an external licensed or in-house appraiser appointed by the bank.
If the purchase price is below its market value, the bank may grant an amount greater than what you have paid for the purpose of property renovation. If the market appraisal is lower than the purchase price, the loan will be smaller than what you have paid. In this case, you will need to have a down payment to cover the difference. Professional brokers can offer you the right property, depending on whether you have a down payment or not.
Most banks finance between 80-90% of the market price of the property. The down payment you need to have in this case is 10 ~ 20% of the property price. For properties without Act 16, a larger down payment is required from the buyer. If you have no personal funds but want to buy a property, don’t worry, there is also an option. The bank can offer you an additional consumer loan.
It is important for buyers to know that in addition to the price of the property, there are also costs for notary fees, property purchase tax (paid to the respective municipality), as well as a commission for the Real Estate Agency that mediates the transaction. You can check the respective notary fees in the Notary Fees Calculator at the provided link:
www.notarial-calculator.imoti-bulgaria.com
Loan term – the usual offers for a housing loan have a term between 20 – 35 years, according to the bank’s assessment and its credit policy. An important point here is that when you take out a loan for the maximum term, which in turn gives you the comfort of the lowest monthly installment, you have the opportunity to make partial early repayments when you have the opportunity. This way, you reduce the loan term yourself and the interest costs will significantly decrease.
There is also the possibility of a grace period if you invest in construction, which requires time to build. During the grace period, only the interest is paid.
Annual interest rate – generally speaking, it varies. It depends on the collateral for the loan – mortgage, pledge on a deposit, and whether the borrower’s income is verified or not. Some banks offer their loyal customers loans with an interest rate lower than the current one, so-called preferential interest rates. “New Home 1” has agreements with leading banks to provide such preferential interest rates to its customers.
For the approval of a housing loan, most banks require a preliminary purchase-sale agreement, which describes the property, its price, and the conditions under which the sale will take place. We recommend using an agency to prepare the agreement, as they have experience in deals with various specifics (aware of cases where problems may arise in the future) and undertake to protect the buyer’s interests. A notarial deed with a deferred payment can be signed, i.e. you can pay the price of the property after the transfer of ownership rights, under the conditions described in the notarial deed.
Other banks provide loans without the client having a specific property in mind. They analyze the income of the loan applicant and inform them about the possibilities of obtaining a loan. Then the bank gives several months for the search and selection of a property. Most often, the property being purchased is accepted as collateral for the loan. Usually, the bank requires the property to be insured for the duration of the loan.
Construction loans, finishing works loans, and improvement loans are often used in stages, with banks conducting financial and technical control over the targeted investment of the funds.
The age of the loan applicant is particularly important for granting a loan. Most banks take into account and have their own requirements regarding the sum of the loan applicant’s age and the loan term within which it should vary.
Author: Stanimir Stankov / VIP Clients Manager, New Home 1 / tel .: 0894 555 690
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