Do we still have a chance?

[PatMa]

Hi All,

We are kindly looking for advise regarding our purchase of property in Bulgaria.

We decided to buy studio in Bulgaria (New Line Village @ Sunny Beach) in July 2007 with completion date estimated in June 2008. We had to pay 30% of purchase value (19000E from 63000E) in a month time from July 2007. The rest, 70% we must pay on completion date. In February 2008 we ordered and paid for furniture package.
We decided to use service of „independent” financial adviser to get a mortgage worth 70% of the property value, which as we were advised (in July 2007) meant to be around 6.5% interest rate. As we recently found out our low credit score does not qualify us to get mentioned above 6.5% and they can offer us 9.9% instead.
In this situation we will not be able to handle expenses in connection with much higher interest rate than expected.

We would like to resign from this investment and, if possible, get some of our money which we have already invested. Or find another way to resign or sell off what we already have........
Do you think there is any other way to get away from this situation?

We would also appreciate you personal opinion about this situation basically to make the right decision.

 

[Jain and Chris]

Yes, this is a problem. I'm afraid the banks have been taking a more and more cautious stand in some of the larger resorts.

A lot of this is because most sales made in these resorts are to foreigners who were looking to buy solely for investment and with building still continuing the banks are naturally becoming wary (as, if they had to foreclose on a property due to defaulting on payments, then they consider the saleability of the property in the light of continuing construction). Additionally, many of the loans applied for have been and still are "self declaring" and so many of the lenders still offering this kind of mortgage are upping the interest rates.

Did you have a clause inserted in your Preliminary Contract stating that the purchase was being made on the basis of your obtaining a mortgage? If so, what were the exact terms of this clause (for example, did it say that you would continue with the sale if a mortgage were granted or was it more specific, saying that you would continue if the mortgage was granted at 6.5% to 7.5%)? If the latter, then you would be within your rights to no longer go ahead with the purchase. Of course, you'd have to provide written documentation showing that you did indeed apply for a mortgage and that it was only offered at an interest rate outside the terms of what was agreed in the Prelim Contract.

Check the Prelim first with the lawyer who is acting for you.

All the best

 

[PatMa]

Nothing in our contract about mortgage ;-(

We will get in touch with our lawyer.....or we might look for a better one.

Thanks,

 

[runchev]

You can resign from your investment, but you will lose any money paid now and maybe pay some penalties after all.
The last 2 years the rate was around 10 %, so I do not get it how this adviser can tell you 6.5%. This rate is for Bulgarians, not for foreigners.

Speak to your lawyer, but I do not think the developer will give you back the money.

 

[Jain and Chris]

Hi Runchev

It depends upon where they are seeking funds from. For example, it may be a UK bank and they are re-mortgaging their property in which case 6.5% is not at all unlikely.

I don't know who you do your banking with but we looked into a mortgage at the end of last year here in Bulgaria for a property we wanted to buy and were offered 6.5% from a Bulgarian bank ! So, it's certainly nothing to do with foreigner v Bulgarians mortgage rates. There are many Bulgarian banks offering reasonable deals. I know there is one offering 6.75% currently. Of course you need a good credit rating and proof of their minimum income requirements to get this... only normal with any bank.

On top of this all the banks everywhere seem to be drawing in their horns right now with this "credit crunch" - a great deal of which in the UK seems to be driven by the media.

For PatMa, I think if you have no get out clause in your contract you will have to proceed or forfeit your deposit. However, do check with your lawyer... If you have to proceed or forfeit, then only you can decide which is best for you. If you decide to continue, then you should look to raising the additional finance. Can you do this against your UK property if you have one? There are other avenues too and you will need to explore those if you want to go on.

All the best