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Buying your first home in Malta is probably the largest financial commitment you’ve undertaken in your life so far.

As a first-time buyer, it’s an exciting step that will set you up for a new stage in your life, but between getting your finances in order, viewing properties and finding the one that’s right for you, and meetings with agents, architects and notaries, it can often feel like there’s a lot to juggle.

One of the most crucial steps in purchasing your first home is securing a bank loan. Like government schemes, a wide variety of banks and loan offers are also available for first-time buyers.  However, it is important to understand that the process and researching your options will help you save time, money and hassle on your road to your dream Malta property.

Basics of home loans

Basics of home loans

To find the home loan that best suits your needs, as a first-time buyer in Malta and Gozo, it’s important to understand your own finances, the type of home loan available, interest rates and fees, and the long-term commitment of the loan. The same can be said for Malta government schemes which may apply to certain people before buying Malta real estate.

A typical home loan will cover up to 90% of the value of your Malta property, meaning you’ll need to provide 10% as a deposit. The maximum amount you’re able to borrow will be determined based on your income.

Home loans are typically repayable on a monthly basis over a maximum period of 40 years or until retirement age, whichever comes first.

The bank will usually require an architect’s valuation of the property, proof of your income and financial commitments, as well as security to cover the loan. Types of security you could be asked for include legal hypothecs, which provide the bank with a legal right over the property, a pledge on a life assurance policy that covers the loan amount, and a pledge on property insurance.

Types of home loans

Types of home loans

Typical home loans when buying property in Malta as a first-time buyer come in two main types: variable interest rate and fixed interest rate.

Variable interest rate loans

The most common is variable interest rate loans, which means that the rate of interest you, as a first-time buyer have to pay, and therefore the repayment amount or the number of repayments, changes over the period of the home loan. The interest rate is quoted as a margin above the bank’s base rate, so changes to the margin or the base rate will mean a change to your repayment amounts.

Fixed interest rate loans

On the other hand, in a fixed interest rate loan, your interest rate and repayment amount will remain unchanged during an agreed fixed term regardless of changes to the bank’s base interest rates, unless you opt out against payment of an agreed fee.

Variable interest rates could benefit first-time buyers purchasing Malta real estate as the rates could be lower at the start of the term but include the risk that the rates could increase over the term of the home loan.

Meanwhile, the benefit of a fixed interest rate loan is that it gives you certainty over your monthly loan costs for an agreed term and means rate increases won’t affect you, but also means less flexibility in paying off your loan, and usually fewer beneficial features.

Home loans for first-time buyers

Home loans for first-time buyers

It’s always important to shop around to find a loan that best suits your circumstances, but as a first-time buyer, it’s particularly worth your while as a number of banks may have special loan schemes specifically tailored to those purchasing their first Malta property.

HSBC HomeStart Loan

For example, the HSBC HomeStart loan allows first-time buyers to pay only the interest during the first three of five years of the loan, meaning much lower initial repayments as you’re not repaying any capital during the first years. The loan then converts to a stand capital and interest repayment schedule for the rest of the term.

Other first-time buyers loans

Other loans from different banks like BOV or APS are specifically aimed at first-time buyers. Such other first-time buyer home loans offer fixed interest rates for the first few years of the loan period before converting to a variable interest rate repayment plan, refunds or discounts on fees associated with the loan, and other beneficial features.

First-time buyers loan fees

When working out the size of loan you can afford, and therefore the sort of Malta real estate you could be looking to buy, it’s important to also keep in mind a number of fees that come attached.

These range from processing and legal fees, some of which may be reduced or waived for first-time buyers depending on the features of your loan, to architects’ fees should the bank appoint its own architect to value the property.

Also keep in mind costs such as premiums for life assurance and property insurance which to secure your loan, as well as notarial fees, registry fees and others that will be part of the process of buying your property. Read more about ten tips for first-time buyers before buying Malta real estate.

Your Malta property agent can help guide you through the process of finding and applying for a first-time buyers home loan. Get in touch today to get started.