Isabella Zammit, Friday, 15 November 2013
This article is part of a series of 8 articles about buying property in Malta. The other articles in the series cover the following topics:
Malta is a country which has become increasingly popular with foreign nationals looking to relocate. If you want to buy a home, it’s always an option
to take out a mortgage. Mortgages work very much like in other countries. Let’s take a look at the ins and outs of a mortgage in Malta.
Can Foreigners Take Out Mortgages?
Foreigners can take out mortgages in Malta if they want to buy a property. There are some banks who will only lend to Maltese residents. However,
don’t be discouraged; the major international banks operating in Malta deal with non-nationals on a regular basis too.
Many of these international banks will even help you to bridge the gap between moving from your old country to the island through bridging loans and
other financial aids. There are no unfair rules restricting foreign ownership of property here.
How Much Can You Borrow?
A lot of banks have online mortgage calculators you can use to determine how much you’re eligible to borrow under the current rules. There are a
number of factors which come into play when determining how much you can borrow.
Your income is the main factor. Some banks will allow you to borrow up to four times your gross income. If you’re buying the property with someone
else, your joint income will also be taken into account. If you’re self-employed your fluctuating income could mean you can borrow less.
Your age will play a part simply because banks want to know you’re going to live long enough to pay back the mortgage. Home loans often last from 30
to 40 years. If you’re already aged 50, you’re considered a higher risk and can therefore borrow less.
Along with your age, your health will be assessed. People in poor states of health, or those who have chronic conditions, will find it hard to borrow
due to their reduced life expectancy rates.
These are the main factors which are taken into account. Things like your previous credit history will figure on any application. It’s rare for you
be denied a mortgage completely. If you’re considered a risk you won’t be able to borrow as much money, and this could prevent you from moving to
The Fees You Pay
We’ve already discussed the various fees and charges you’ll have to pay in another article on any property purchases. It’s important for you to
consider how much this is going to cost you. It could impact whether you can even make a down payment on your mortgage.
Since most charges, like stamp duty, are determined by the purchasing value or market value of the property, a miscalculation could stop you from
making the required deposit.
How Much Do I Need to Deposit?
Deposits have risen since the global economic crisis of 2008. At one point, very low deposits were common. These days, you’ll have to pay an average
of 20% to get a mortgage. It really depends on the bank and the mortgage policy, however.
Although there’s always a required deposit, you can increase your deposit and benefit from lower rates. If you decide to make a down payment of 30%
instead of the required 20%, the amount you pay monthly will decrease. You’ll save more money in the long-term. It’s always worth paying as much as
possible towards your deposit.
How Long Does it Take to Get a Mortgage?
The time it takes depends on the bank and how much of a presence they have in Malta. A large international bank could complete your application in a
couple of months. If you require more checks, such as if you come from outside the EU, it might take an extra month to complete.
How Do I Increase My Chances of Getting a Mortgage?
- Your monthly mortgage payments shouldn’t be much more than 35% of your monthly gross income. If it is, you might be deemed a risk because the
chances are you won’t have savings and if interest rates go up it could limit your ability to pay.
- Have all the required documentation to hand before applying for a mortgage. Your notary will be able to help you prepare for this. In
some cases, they will attend the mortgage meeting with you.
- Make sure you have full ownership of the property. You shouldn’t attempt to negotiate a mortgage on a property when you haven’t even signed the
preliminary agreement yet.
- Have a good credit history. Your credit history can and will be used from your previous country. If you’ve had a mortgage before, this will make
it more likely you’ll get a mortgage in Malta.
- You need insurance. This gives the bank some reassurance you’ll be able to make the repayments on your mortgage in the long-term. Without an
appropriate insurance policy, you won’t get a mortgage as a foreign national.