In this guide, you will discover some practical advice on how you can work out your budget, what expenses to expect when buying a property and what paperwork you will need when applying for a home loan in Malta.
Working Out How Much You Can Afford
Buying any property is usually a long term investment which will require a lot of financial commitment but is one step most of us will have to take in our lives. You will have to sit down and do some calculations to see what you have coming in and going out, what you have left at the end of each month and how much savings you have.
It’s important that you are realistic about what you can afford and you don’t go over budget leaving yourself short every month as there is no point in living in a house that you can’t afford to enjoy.
Below are most of the expenses you have to consider when buying
- 10% of the value of the property as a deposit
- 1% towards the stamp duty with remaining % to be paid on day of contract
- Architect fees to inspect property
- Notary fees
- Home Insurance
- Life Insurance
Once you have worked out these approximate costs you can see if it’s feasible. The next step would be to go to your local bank and discuss taking out a home loan (if required).
Applying For a Home Loan
When buying a property, the biggest ongoing financial commitment is the Home Loan. This is a type of loan that is secured on the property. If you sell the property before this loan has been paid off, the bank will be paid first and anything left will be paid to you. Should you fall behind on your repayments, the bank will have rights to repossess the property.
Most local banks require a minimum of 10% deposit to be paid and they will lend you the remaining 90%. It’s sometimes worth shopping around to see who will give you better deal but in general the rates are the same as they are governed by the Bank of Malta. Most prefer to use the bank when they have their accounts already as they already have a relationship which will make getting a loan easier.
How The Bank Will Assess You
They will first look in to your previous bank statements and see what type of accounts you have; if you have been late with repayments of any other loans, being overdrawn (without authorization) or any cheques that were not honoured, they will then look in to your work history to see what you have been earning and see that you also have future earnings coming in.
The bank will not commit to giving you a loan till you have found a property and applied for a loan but in general they will give you a good idea of how much you will be allowed to borrow.
They bank will request the following to start processing a home loan application:
- Identity card
- Last 3 month’s pay slips (if employed)
- Profits/Losses (if self-employed)
- Last year’s FS3 or FS5 (depending if you are employed or self-employed)
- Plans of the property
- Copy of the preliminary contract
- Land registry plan
- Architect’s evaluation
Once the bank receives all of the required documents, they will then start to process the file which usually takes 4-6 weeks. If successful they will then issue a sanction letter which is a full approval of the loan. This sanction letter is to be given to your notary so they can continue with their work.