Insurance and Additional Costs when Taking Out a Mortgage Loan

What stands behind the final price of a home bought with a mortgage loan?

Purchasing a home with a mortgage loan is one of the most significant financial steps in any person’s life. It is a long-term commitment that requires careful planning and a realistic assessment—not only of the monthly instalment but also of all additional costs accompanying the process. Many clients are surprised when, at the end of the deal, the total amount paid significantly exceeds their initial expectations. The reason is often found not only in the interest paid but also in additional fees, insurance, and notary costs.

As a registered credit intermediary, our mission at Creditchoice Ltd. is to provide full transparency and prepare our clients for all aspects of mortgage lending. In this article, we will examine those specific additional costs that can seriously impact your final budget.

What insurance is required when taking out a mortgage loan?

Property Insurance

Property insurance is a mandatory requirement when taking out a mortgage because it protects the real estate serving as collateral. Most banks offering mortgage loans have agreements with specific insurance companies whose products they offer. Regardless of the choice of insurer, we recommend that the insured sum equals the market value of the property—its actual value. Typically, the bank requires basic coverage for risks such as fire, natural disasters, plumbing accidents, earthquakes, and others. The client may optionally add extra coverage or insure their movable property within the home.

Life Insurance

Life insurance for a mortgage loan is not yet mandatory in all banks, but it is highly recommended. It provides protection against unfavourable outcomes, such as loss of life or disability, resulting from the borrower’s accident or illness. Its main advantage is that, in the event of a fatal outcome, the insurer will pay the bank compensation equal to the loan balance. Furthermore, insurance is a type of guarantee for the bank that the funds will be repaid. Life insurance is contracted between an insurer and the insured, with the bank (the creditor) as the beneficiary. The bank will offer you a quote from its partner insurer to provide better loan terms.

What are the additional costs when taking out a mortgage?

• Market Valuation of the Property – Determined according to the current tariff of the independent appraiser. Based on this valuation, the bank determines the loan amount, which is typically repaid by the borrower.

• Notary Fee – Calculated based on the material interest and the tariff of the notary certifying the deal, according to the Law on Notaries and Notary Activity.

• Registration Fee for the Title Deed: 0.1% of the loan amount, payable to the Registry Agency.

• Local Tax on Real Estate Acquisition – The rate is set annually by municipalities in Bulgaria under the Law on Local Taxes and Fees.

• Bank Fees – Banks have specific tariffs for fees and commissions applied to services. These may include loan disbursement fees, collateral analysis fees, account maintenance fees, early-repayment fees, and others. Banks offer various options to attract clients, sometimes covering part of the fees.

How can Creditchoice Ltd. assist you?

If you are about to take out a mortgage loan to buy your dream home, you must be well-informed about all related costs. Our Mortgage Brokers are familiar with the banks’ lending conditions and can assist you throughout the process with:

• Creating a client profile.

• Providing offers from leading banks and a comparative analysis of their terms.

• Full information on all loan costs – interest, fees, insurance, and more.

• Assistance in choosing a mortgage loan offer.

• Support with preparing and processing documentation.

• Facilitating overall communication with the chosen bank, which continues even after the loan is disbursed.

• Credit consultation from experienced professionals.

• An individual approach based on the profile, needs, and capabilities of the client.

The services provided are free of charge and for the client’s benefit. We compare, you choose!