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Searching for your first home is always an exciting time. For couples it's the start of their future together. Whilst for singletons, it's their first step to full independence at last!
Most people start off with an image in their minds of what their perfect home looks like. However, many first time buyers will find that they have to compromise on that image along the way, taking into account other considerations that they may not have originally thought of. Our guide for first time buyers in Malta and elsewhere should give you a much clearer idea of what to expect and where to start.
Getting a Mortgage
You cannot buy your dream home without the funds to do so. So, unless you have a pot of cash that you can use to pay for your house, you will need to look into getting a mortgage.
You might wonder why you should look into this financial responsibility before you have even found your ideal property. However, just imagine if you spent time viewing properties before setting your heart on the perfect one, only to discover that you couldn't get the mortgage you would need to be able to purchase it.
Therefore, at the earliest opportunity you should seek advice from one of our estate agents. Not only can we guide you through the mortgage process but, we can put you in touch with a trusted local mortgage adviser who can go through your finances and give you a good idea of how much you'll be offered by the banks. Only then will you have a realistic sum of what you can afford. You don't have to apply for a mortgage straight away but, if you have an idea of what is on offer you can get the ball rolling once you find a property.
Residents of the country in which they are applying for a mortgage may well have options open to them that foreign buyers don't. So, wherever you are buying, it is worth comparing mortgages in your own country to those offered in the country you want to buy. For instance, residents of Malta can borrow up to 90% depending upon the bank, whereas foreign buyers may only borrow a maximum of 80%.
When comparing mortgages the main areas to focus on are the APR and the length of the mortgage. You may wish to go for a fixed rate if you feel that interest might rise in the future or a variable rate, which can result in lower monthly repayments. Interest only home loans are also available, whereby the borrower only pays off the interest and not the capital. However, this means that at the end of the mortgage term only the interest will be paid off while the the original loan amount will still need to be repaid.
The length of the mortgage can vary from 10 to 40 years. The longer you take a mortgage out for, the lower your repayments. However, you will end up paying more overall. All of this is dependent on your circumstances and is something your mortgage adviser can help you with.
To get an idea of what your monthly re-payments will be, use a Mortgage Calculator.
First Time Buyer Schemes
Mortgage providers are keen to attract first time buyers. Therefore there are many schemes available which offer incentives such as lump sums for buyers who are willing to save at the same time, mortgages of up to 95% and save-to-buy schemes. In Malta the housing authority provides a subsidy on the rate of interest on loans given to first time buyers. There are also grants available to help buyers in the construction or renovation of their first home.
Work Out a Budget
Budgeting will help you know roughly how much you can borrow. Based on this budget you may have to compromise on your dream home a little. It might be a good idea to sit down and work out what are your essentials and what you are willing to compromise on. For example, your essentials might be location, number of bedrooms or parking, whereas you might be willing to compromise on a garden and the type of property you buy. Property prices do vary considerably so, by compromising a little here and there you might bag yourself a bargain.
In with your budget you need to allow for expenses. This is true no matter where you are buying. Make sure you put aside at least 10% of the sale price to cover legal costs, searches and other fees.
FeesStamp Duty - 5% Notary Fee - 1% Registration and/or permit fees up to 2% In Malta a 10-15% deposit is also required once the preliminary agreement is signed. If you drop out of the agreement without a legal reason, you forfeit this deposit.
Do Your Research
Once you have a property in mind then you need to focus on the area. In Malta, residents can buy pretty much buy anywhere but foreign buyers may be restricted to certain areas unless they apply for a permit from the AIP (Acquisition of Immovable Property).
Don't be afraid to knock on neighbours' doors and ask them what kind of area it is to live in. Ask what are the disadvantages as well as advantages of where they live. If there is a problem with the area, you'd rather know about it before you commit to buy.
Visit the area at different times of the day, such as in the evening when everyone is at home and at the weekends. This will give you an idea about any potential problems such as parking, youths, noise, etc.
If you have a family then find out about the catchment area and visit local schools and parks. Find out what the community has to offer. After all you will be living here day in and day out so you need to discover if the area is suited to your needs. Is there easy access to public transport? Where are the nearest supermarkets and doctors? Are there any local shops and restaurants? What about leisure facilities?
New Build Properties or Renovation Projects?
There is a huge range of properties available in Malta to buy. These vary from traditional old fishing houses in small villages to modern apartment blocks in the centre of town.
Renovations can be a tempting option but you will have to factor in costs for the renovation and your mortgage options might be limited. If you are looking at a renovation then get an estimate from a couple of firms for the full cost and add on another couple of thousand for extras. Renovations, especially in Malta, are hugely popular with expats and investors so you might find yourself in a bidding war, yet remember that there are grants available for first time buyers.
New builds are easier to find and they are usually conveniently located with easy access to bars, shops, restaurants etc. These are popular with families and first time buyers and getting a mortgage for new builds is fairly straightforward. The only disadvantage is that there isn't much scope for knocking down the price.
Above all, make sure that you only deal with professional and reputable companies every step of the way and that you know what bargaining chips you hold as a first time buyer.
N.B. Information contained within this article was correct at time of publish. However, stats and fees are subject to change, so contact your estate agent for up to the minute information.