How is lending to Bulgarians with income from abroad for the purchase of property in Bulgaria carried out?

In 2011 a little over 2 million are the counted Bulgarians living abroad in 2016. have exceeded over 3 million, for 2023 this figure is not clear, but we could assume that it is even higher. There are many registered in the USA, Germany, UK, Spain, Greece, France, Canada, Italy, etc. The spheres of activity of these Bulgarians are in various sectors, but one of the most common are those in the IT sector and in financial companies in management and managerial positions.

In the modern economic environment, there is an increasingly frequent tendency for Bulgarian citizens, working and earning their income abroad, to invest in real estate on native land. This raises important questions about the specifics of lending in such situations. In the context of globalization and workforce mobility, banks in Bulgaria have developed specific requirements and procedures for borrowers with income from abroad. These requirements are aimed at ensuring financial stability and reducing risk, while providing an opportunity for investments in real estate assets in the country.

In this resource, we will explain everything you need to know about how banks from our country approach such persons when lending for the purpose of buying property in Bulgaria.

What do the banks in our country require of a borrower with income from abroad?

In the next section, we will look at the main aspects of lending, specific to the category of borrowers with income from abroad, looking at how banks in our country evaluate their income, their credit history, as well as other factors that affect the approval of a mortgage loan.

Reference for Credit Indebtedness and Credit History

A key element in the lending process for the purchase of property in Bulgaria by persons with income from abroad is the provision of a detailed report on their credit indebtedness and history. This reference plays a key role in banks’ assessment of the applicant’s creditworthiness and the risk associated with granting credit.

• Source of the Reference: Depending on the country in which the borrower generates his income, the credit history reference can be issued by government institutions, such as the Central Credit Register (CCR) in Bulgaria, or by private credit bureaus, such as Experian and Equifax. It is important that these documents provide complete and accurate information about the applicant’s financial situation.
• Content of the Reference: For a successful application for a mortgage loan, a so-called “Credit Report” is required, which includes information on all current and past credit obligations, the amount of loans, monthly installments, as well as available credit limits. Only the assessment of the credit rating (Credit Score) is not enough.
• Problems with High Credit Limits: In some countries, high credit card credit limits can be problematic. This is especially important in cases where credit cards are used as a means of building a credit history, as large limits can be interpreted as a potential for high financial risk on the part of banks.

This information is critical for assessing the creditworthiness of individuals with income from abroad and plays an important role in the mortgage loan approval process in Bulgaria.

A co-debtor with permanent residence in Bulgaria

One of the key aspects in lending to persons with income from abroad for the purchase of property in Bulgaria is the presence of a co-debtor with a permanent residence in the country. Almost all banks require such a co-debtor, which is a measure to increase security and reduce the risk for the bank.

• Why a co-borrower?: A co-borrower is jointly and severally liable for the loan, meaning that if the primary borrower defaults, the co-borrower becomes responsible for the payments. This practice gives additional security to the bank.
• Co-borrower requirements: Usually, the co-borrower must meet certain criteria such as age, stable income, and often a family relationship with the borrower. A family relationship is often preferred because it is believed to create a greater emotional commitment to repaying the loan.
• Proof of Residence: It is important that the co-debtor can prove his permanent residence in Bulgaria. This can be done through official documents such as an identity card, address registration, or other relevant documents.
• Alternative – Procedural Representative: In some cases, instead of a co-debtor, a procedural representative can be used in Bulgaria. This can be a convenient option when it is not possible to find a suitable co-debtor.
• Exceptions: There are cases where a co-debtor is not required – this usually applies to customers with a very high credit profile, for example highly qualified professionals in key positions with high incomes and a significant co-payment of the loan.

For what purpose do banks grant loans in our country and how can you secure your loan?

This section will provide a clear overview of the main purposes of loans for Bulgarians with income from abroad, as well as the types of properties that are accepted as collateral, which is essential for a successful loan application.

The purpose of the loan and collateral are key aspects in lending to Bulgarians with income from abroad. Understanding these aspects is important for both the borrowers and the banks providing the financing.

• Purpose of the Loan (Mortgage lending to persons with income from abroad): Banks in Bulgaria mainly grant loans to persons with income from abroad for two main purposes:
• • • Purchase of a home (studio, shop, office and other non-residential properties are excluded).
    • Refinancing an existing loan that was used to purchase a home.

• Collateral:

• • Eligible Properties: Generally, banks accept as collateral only operational properties located in residential, administrative or commercial buildings.
  • Avoiding Risky Properties: Roughly constructed properties (eg deed 14 or deed 15) and non-residential properties are generally not accepted as collateral due to the high risk involved.
  • Additional Collateral: In some cases, additional collateral may be required, such as blocked installments on a bank account or the presence of a co-debtor.
• Possibilities for Exceptions: Despite these general rules, there are cases where banks can make exceptions depending on the specific circumstances and credit profile of the customer.
• Consumer Loans: Bulgarians with income from abroad can also apply for consumer loans, which have different conditions and requirements compared to mortgage loans.

What State Sources of Income are Acceptable for Bulgarians with income from abroad?

When lending to Bulgarians with income from abroad, banks in Bulgaria have different approaches regarding the acceptance of the income depending on their geographical source. It’s important to understand these differences because they affect your ability to get credit.

What are the practices for Accepting Income from Different Countries in Bulgarian banks?

Some banks are willing to accept income from European Union (EU) and European Free Trade Association (EFTA) member states.

Other banks are expanding this range to include income from countries such as the UK, US and Canada.

There are also those that have no geographical restrictions on the source of income.

In real practice, the DOT.WON Real Estate team has implemented loans with income from many countries, including the USA, Canada, Great Britain, Ireland, Germany, France, Italy, Spain, Austria, Belgium, the Netherlands, Portugal, Greece, Malta, the Czech Republic , Poland, Sweden, Switzerland, UAE, Singapore, Saudi Arabia and China (including Hong Kong).

How is mortgage lending for persons residing in Bulgaria, but with income from abroad?

An interesting case is that of Bulgarian citizens who reside permanently in Bulgaria, but have income from a foreign source. Mortgage lending to Bulgarian citizens who have a permanent address in Bulgaria, but generate their income from abroad, is a specific and interesting case in banking practice. This scenario involves unique challenges and requirements in assessing creditworthiness, taking into account the economic conditions in both Bulgaria and the country where the income comes from. The analysis covers the stability and reliability of foreign income, paying particular attention to currency risk and potential changes in exchange rates.

In the application process, banks require detailed documentation, including not only the traditional income certificates, but also additional certificates that reflect the international nature of the income. This may include references from foreign employers and confirmation of income legitimacy.

With such loans, the currency risk is significant. Fluctuations in exchange rates can affect the borrower’s ability to service the loan, especially if their income is in a foreign currency. In addition to the financial assessment, banks must also consider the various regulations and legislations related to income from abroad, including taxation and international banking norms.

Often, to balance the risk, banks require the presence of a co-debtor with a permanent income in Bulgaria and require additional collateral. This approach provides an additional guarantee for the bank when approving the loan.

Thus, when lending mortgages to persons with income from abroad, residing in Bulgaria, banks apply a complex approach that takes into account many factors to ensure stability and minimize risk.

How is mortgage lending to Seafarers Sailing Under a Foreign Flag?

The income of foreign-flagged seafarers is also considered, with important aspects such as currency conversion, additional costs, the charging and payment of taxes, and the places where the insurance is made.

This section presents a general overview of the acceptable state sources of income when lending to Bulgarians with income from abroad, as well as the specific cases that require additional attention.

What are the usual financial parameters of loan offers to Bulgarians with income from abroad?