The purchase of a property in Bulgaria can be financed with a mortgage on a real estate owned by the purchaser or by a third party. A mortgage can be created on the purchased real estate or alternatively on a property, which has nothing to do with the current transaction but which is used as collateral for the loan given.
The Bulgarian legislation recognizes two kinds of mortgages: contractual mortgage and statutory mortgage. The contractual mortgage is an agreement between the owner of the real estate and the creditor for the use of this property as a security for the loan. It should be done in the form of a notary deed, pretty much the way the title is transferred from a seller to a buyer. It should be noted that contractual mortgage on the purchased property can be done after the notary transfer is completed.
However the statutory mortgage can be a very useful source for the financing of the purchase itself if let say the funds for the purchase are not sufficient. This mortgage stems from the operation of law. If the buyer takes a loan from the bank to finance the transaction then the bank is allowed to create unilaterally a mortgage on the real estate to be purchased with the loan. This is very convenient both for the buyer and the bank. The buyer only has to apply for a loan, collecting some necessary documents required by the bank and the loan will be easily granted. On the other hand the bank can easily have a security for the debt just by filing a request to the Real Estate Registry and a mortgage in the amount of the loan given will be created. A statutory mortgage can be created also in favour of the seller if the buyer has not paid the full contract price. That is if the developer agrees to give a credit to the buyer (i.e. transferring the title before getting all the money) he can create a mortgage on the purchased real estate in the amount of the unpaid installment.
It is important to know that the title of the real estate that serves as collateral is not transferred. If later the property is sold to somebody else and the mortgage is not discharged, the mortgage is enforceable against the rights of the new owner. If the debtor is in default and the credit is secured by a mortgage, the creditor (i.e. the bank) may require from the bailiff to make a public sale of the property encumbered. Upon the completion of the sale the creditor may satisfy from the price of the real estate up to the amount of the credit given. The rest is given back to the owner.

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