Home Loans: Where to start?

June 23, 2020

Congratulations, you have decided to take the leap and become a home owner.

However, many first time buyers make the mistake to start looking for property before checking with the bank their disposable income, which will allow them to buy their first home. This mistake can cause disappointment, you might have found a property but the bank would not give the loan.

Here are some guidelines of the documentation required by the bank, as well as other expectations the bank would need throughout the loan. The requirements are almost the same for all the banks in Malta.

First and foremost you need to have an idea of what kind of property you are looking for i.e. if shell, unconverted or finished. This determines the type of home loan required. As a general rule, one can obtain flexible loans that offer 90% of the purchase price, with repayments over 40years. If you are purchasing a home with your partner or spouse, the bank will take into consideration both incomes available. This means that 10% of the property price has to be paid by yourself.

If you are a non-resident, the loan would cover up to 80% of the property prices.

Therefore prior to start looking for a property, one should visit the bank and discuss the available loan amount. This will allow the estate agent to find properties within your budget bracket.

Whatever the case, the general rule is that loan repayments would not exceed 30% of the gross income.

  • Normally to apply for a home loan one would need to submit the following documentation:
  • 3 recent payslips and FS3 as proof of income;
  • An architect’s estimate of the property value;
  • Building permits and plans;
  • Records of existing financial commitments, such as credit card debt and any other loans;
  • Copies of the applicant’s Identity card;
  • Copy of the preliminary agreement;
  • If the applicant is not an account holder, a character reference might be required;
  • Life insurance to cover the home loan and also a building insurance policy.

If you are a non-resident, the bank might require additional documentation, however this depends on the applicant’s circumstances.

Once all the documentation has been provided, the bank will offer the home loans subject to a number of conditions such as:

  • 90% of the purchase price or completions costs for residents of 80% pf the purchase price for non-residents;
  • There are preferential interest rates for first years and for high value loans;
  • The monthly repayments will not exceed 30% of the gross income;
  • Flexible loan repayment terms of up to 40years, or up until age 65years.

If on the other hand, you are selling your home and buying another, all banks offer
bridging loans. A bridging loan allows you to take a home loan, whilst having another
home loan until you sell you first home and pay the first home loan.