Banks, loans and buying on Malta
As very often happens, many first time buyers in Malta seek that extra financial assistance when they set out to purchase a property. It is all very well to decide to take out a home loan with a bank, but what about the bank’s perspective on the matter? Checking things out with the Bank of Valletta’s Home Loans Department helps to provide some insight into the matter.
First-time buyers in Malta are the first most likely category to seek a bank loan and in fact comprise on average, 60% of all new applicants. It is standard banking practice to request customers to provide a contribution towards the purchase price of the property so they finance part of the acquisition costs from their own funds. Typically for first-time buyers this contribution or deposit, would be in the region of 10 – 20%* (*depending on a number of variables). Being usually young and still in their early working years, first-time buyers, at times, find it difficult to raise this contribution/deposit.
Asked whether the bank differentiates between a first-time buyer who is single, a married couple or an co-habiting couple, the bank’s representative comments thus, “The Bank determines the eligibility to a home loan primarily on the basis of repayment capability, if it is affordable, and represents a fair banking risk, irrespective of whether the customer is a Maltese national or a foreign purchaser. A typically problematic first-time buyer scenario is being faced with customers who have already shopped around for a property before checking how much they can actually borrow. It can be very frustrating for people to fall in love with a property which they cannot really afford to buy. We urge potential customers to first work out how much they can possibly borrow, before going through property searches to avoid disappointment when faced with non-affordability. The BOV website includes a loan calculator which guides customers when calculating repayments, but BOV staff members are always on hand to offer advise.”
It is definitely not in a bank’s or its customers’ interest to loan/borrow more than can be repaid. Even whilst Malta faces the phenomenon of global recession, the recent adjustment in residential property prices has certainly affected this chunk of the market, generally rendering the acquisition of a first property rather more affordable. However as a Bank, BOV believes it is its corporate social responsibility to guide customers and ensure they do not allow their hearts to rule their heads, even if this means applications for loans that are not affordable must be turned down.
With a constant influx of foreigners opting to purchase property on Malta, the bank’s policy is that any customer or prospective customer can call at any BOV Branch in order to enquire about home loan entitlement. Whilst the Bank requests customers to provide standard collateral items such as (but not limited to) hypothecs on the Malta property being acquired, life insurance policies, and insurance policies covering the house, where foreign investors are concerned and depending on the particular circumstances of the case, these might need to make available additional security. However this is always determined by the risk profile of the request rather than the nationality of the applicant.
Purchasing real estate in Malta or Gozo for the first time may be a daunting task however if you are careful and honest with what your needs are and do your homework correctly you are bound to have a smooth running experience. It is always recommended that once you are aware of your budget that you contact a professional real estate agent to assist you in finding the right home.
by Marika Azzopardi
Marika Azzopardi is a freelance writer and journalist. A frequent contributor to national English language papers and magazines, she writes about a bevy of topics including art, people and life in general. She is also the author of children’s books and short stories, delving into adult fiction from time to time.