MORTGAGES TO BUY A HOUSE

Mortgages and Financing to Buy a House in Malta


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What you need to know about mortgages in Malta

Maisonette in Malta

According to the National Statistics Office (NSO), 81.6 per cent of Maltese people own their own home. If you want to join the ranks of homeowners, you’ll need to understand the process. As well as the excitement of viewing potential properties, there is also the regimen of the financial process to go through.

Setting a Budget

You probably have a vision of your dream house but the soundest piece of advice anyone will give you is to live within your means. Buying a house is more than just the purchase cost which you will pay as a mortgage. You also have to factor in your living expenses which includes everything from utilities to food.

The banking system is set up to help you in this as there are formulae they use to determine how much they are willing to lend you as a mortgage. It is best to visit your bank to find out your potential lending limit before you start looking for property.  It’s no good having your eye on a villa with pool if the bank is only willing to lend you enough for a studio apartment.  You can find plenty of loan calculators online that will give you an idea of how much a bank is likely to lend you.

It is also advisable to shop around for the best mortgage rates and read some online review sites.

The main banks offering home loans in Malta are:

  • HSBC Bank Malta plc
  • Bank of Valletta plc
  • APS bank
  • BNF
  • Lombard Bank

Types of Mortgages

Fixed Interest Rate Mortgage: 

This is the most common type of mortgage, not only in Malta but in the EU. In a fixed-rate mortgage, the interest is guaranteed to remain the same agreed rate for a set period of time. This is of benefit because you know exactly how much your mortgage payment is every month for the fixed term period. Close to the end of the period, you will renegotiate to agree a rate for the next period. The longer the term is set for, the higher the interest rate is likely to be which is especially helpful in uncertain economic times and rising interest rates but not so advantageous in a stable market.

Variable Interest Rate Mortgage:

A variable rate mortgage is also known as adjustable-rate mortgage or tracker mortgage. With this type of mortgage, the interest rate is periodically adjusted according to an index the lender uses to reflect the cost of borrowing on the credit market. This base rate or standard variable rate can increase or decrease according to wider economic circumstances so your payment can vary. Variable-rate mortgages are often offered at lower rates than fixed-rate mortgages because of the inherent risk in the rate varying over time.

Endowment/Interest Only Mortgage

Once popular, this kind of mortgage is not so readily available these days. Essentially, you pay the interest each month but none of the capital, along with an endowment premium. The capital would then be paid off with the endowment at the end of the mortgage term. The problem is that the endowment may not grow sufficiently to the value required to pay the capital, leading to an endowment shortfall.

Mortgage Terms in Malta

You will need to save for a deposit because banks in Malta typically lend 70-80% of the property value, and in some cases up to 90%.

In the first years, there are preferential interest rates

Monthly repayments cannot exceed 40% of gross income

Repayment terms can be up to 40 years

How to Apply for a Mortgage in Malta

The process is generally the same across all banks and usually, the following documentation is required:

  • A photocopy of your identity card/residence card
  • Three months recent payslips and FS3 or 2 income tax returns if you are self-employed
  • The same details of a second applicant if it is a joint application
  • Written estimate of the property’s value  or a Bank Appointed Architect's valuation report
  • Preliminary agreement or deed of purchase of the property

FAQ

No! You will need to satisfy the bank’s criteria for lending. If you have a bad credit rating or are unable to provide proof of income, it is going to be difficult to obtain a mortgage.
They will vary but you need to consider bank charges, stamp duty, notary charges and architect charges.
Recent measures taken by the Central Bank of Malta require first-time buyers to have at least 10% of the sum to be loaned to be eligible for a mortgage which increases to 15% for second-time buyers or residential real estate (property bought with the intention of renting it out).


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