Mortgage in Malta for foreigners in 2024

Property Prices

Since 2015, property prices have grown by around 35%. Each year, accommodation becomes more expensive by 5%. In this aspect, Malta perfectly keeps up with the EU average.

In 2022, 14,000 properties on the island changed owners. €227,000 was the average purchase price. €3,000 is the average price per square meter in a residential property. Depending on the property type and location, this number can vary from €1,500 to €5,500.

Predictably, the most premium options are situated in the capital and its surroundings. The most affordable variants can be found on the small neighboring island of Gozo. The closer to the sea, the higher the purchase and rental prices. The lack or presence of a picturesque view is the third factor that impacts the price.

Here are some examples of the prices:

For €290,000, you can get a three-bedroom apartment within a 15-minute walking distance from the ocean in an affordable part of the island
For €3.5 million, you can buy a penthouse located 100 meters from the beach

80% of locals live in properties that belong to them. Long-term rentals are not as popular here as on the mainland. Nearly 60% of owners prefer apartments to houses.

The selection of property types is extensive. The most budget-friendly options are studios and one-bedroom apartments. The most posh ones are penthouses with open terraces and sea views as well as renovated historical palazzos. Besides, there any many variants in between, including cozy maisonettes and charming countryside houses.

There is no annual property tax here. The average annual expenses for apartment maintenance are around €3,400.

There are 16 Special Designated Areas (SDAs) on the island. The government wants foreigners to invest in these territories to create premium resorts. If you buy a property in an SDA, you'll be exempt from the restrictions that apply to houses and apartments located elsewhere in Malta. It's not necessary to obtain the permit for the purchase. You'll be able to invest in as many properties as you wish and you'll be allowed to rent them out. The purchase process should be twice as fast as outside the SDAs.

Mortgage Programs

Here are the standard conditions of mortgage loans on the island:

The amount of the loan usually falls within the range of €25,000 to €1,000,000.
The minimum first deposit is around 5%.
You can expect to get up to 80% of the property's value. In outstanding cases, some people manage to get 90% or even 100% — but that would be an exception. As a non-resident, you'll be unlikely to get over 80%.
The maximum duration of the loan is around 40 years. Realistically, a foreigner can expect to get a loan for up to 30 years.
Additional expenses can amount to up to 14% of the property's price. These include registration fees, stamp duty and the fees that you pay to all the assistants, such as the notary and the legal advisor.

There is one potential pitfall that you should be aware of. After you inform the lender about the house or apartment that you'd like to buy, they will carry out an independent valuation of its price. In rare cases, the estimation is considerably lower than the purchase price. Don't hesitate to negotiate then. Otherwise, the lender will provide you with only some part of the funds that you need — and you'll have to search for the rest elsewhere.

Incentives

To incentivize property buyers, the government offers benefits to them. We'd like to inform you about the grants for first-time buyers, VAT return and waiving of stamp duty.

Grants for First-Time Buyers

Individuals who're investing in residential property on the island for the first time can qualify for a €10,000 grant if they take a mortgage. During 10 years, you'll get €1,000 from the grant per annum. Normally, you'll be required to place a deposit of around 5% of the property's price.

The offer for first-time buyers was introduced in 2022 and extended until 2024. Maybe, the government will decide to extend it further — but no one knows for sure.

The property's value shouldn't exceed €500,000. Otherwise, you'll be classified as a wealthy individual who can apply for one of the Maltese residency and citizenship programs. The logic is evident: well-off expats don't need financial support worth €10,000.

The amount of the grant can be €15,000 if the chosen property meets one of the two criteria:

Is recently constructed and fits the standards of traditional Maltese architecture
Was built over two decades ago and no one lived in it for over 7 years

If a property that ticks at least one of these boxes is located not in Malta but in its sister island of Gozo, the amount of the grant can reach €30,000.

VAT Return

If you'd like to restore the property, you can request a VAT return. The maximum amount that you can get is €54,000 on the first €300,000 spent on renovations. This offer is valid for both current and prospective owners.

Waiving of Stamp Duty

Neither the vendor nor the new owner pays stamp duty and final withholding tax on the first €750,000 if the property meets at least one of these criteria:

Was specifically designed according to the traditional island standards
Is located in an Urban Conservation Area
Was built over two decades ago and no one lived in it for over 7 years

First-time buyers don't have to pay stamp duty on the first €200,000 of the property's purchase price. The type and location of the property don't matter. If the house or apartment costs over €200,000, the stamp duty will be 5%.

Those who invest in properties in Gozo are eligible for a reduced stamp duty of 2%. This offer is valid till 2025. Then, the amount of stamp duty will rise to 5%.

When you decide to resell your property, you can qualify for a refund on stamp duty for sellers who don't have any other property. For differently-abled individuals, the maximum amount of refund is €5,000. For everyone else, it's €3,000.

Who Is Eligible for Mortgage

Most Maltese lenders cater to clients who tick three boxes:

Are aged between 18 and 65.
Are in good health.
Have debts that don't exceed 35% of their total income. When calculating the percentage, the lender will take into account the mortgage too. So if you already spend 35% of your income to pay out the existing debts, you'll be unlikely to get a loan.

When applying for a mortgage, you'll have to buy life insurance. If you have serious health issues, local lenders might refuse to provide a loan to you. Or, they might offer unfavorable conditions. In this situation, consider borrowing funds from an institution in your homeland.

Your credit score doesn't matter. However, the lender will ask for references from the financial institutions whose services you've used previously. The larger the amount of money you request, the more likely the bank will be to scrutinize your sources of income.

Mortgage Rates Malta

In 2023, the mortgage credit interest rate on the island is 2.65. One year ago, it was 2.76 and in 2008, it was 5.45. As you see, now is a perfect time to apply for a mortgage.

There are three types of rates available:

Fixed. Such loans are normally issued for a period of 5 to 6 years. Then, you should be able to renew the offer. You'll be paying a fixed rate during all these years. The key advantage of this type of offer is stability. Its primary disadvantage is slightly higher rates, compared to loans with a variable rate.
Variable. The rate will fluctuate. It will depend on the central bank that will determine the prime rate. Plus, your individual circumstances might impact the rate too. If the overall economic situation is favorable, you might end up paying less than with a fixed rate. If a crisis breaks out, your expenses might skyrocket. Such loans can be issued for up to 40 years. The longer the duration of your loan, the more challenging it is to predict the profitability of the offer.
Interest-only. Until the end of a pre-determined period, you'll be paying only the interest rate every month. After this period is over, you'll be required to pay back the debt in full. Just like the offers with a fixed rate, their interest-only counterparts remain valid for 5 or 6 years. However, they aren't subject to renewals. It makes sense to apply for such an offer only if you're almost ready to pay for the property from your own pocket and need just a relatively small sum from the lender. Most lenders have minimum income requirements for such deals.

Malta home loans with either a fixed or a variable rate generate the highest demand. The standard annual percentage rate tends to vary from 3.15% to 4.75%. Early repayment options are uncommon and exit fees may apply. The banks on the island are rather traditional in their approach. They might fail to offer as much flexibility to their clients as their counterparts from the other EU states.

Can a Foreigner Get a Mortgage?

Until 2004, the local government was not too enthusiastic about selling real estate to foreigners. The reason was obvious: the island is very compact. The more expats purchase accommodation, the more prohibitive the prices will be for locals. After this state became an EU member, its policies changed. Today, foreigners from nearly all over the world buy properties here.

Please mind the following restrictions and requirements:

If the chosen property is located outside the SDAs, you should get the Acquisition of Immovable Property permit (AIP). It involves a fee of €233 and you'll need to wait for it for slightly over one month.
You're allowed to buy only one property outside the SDAs.
Some lenders might be reluctant to cater to foreigners. It's not a reason to worry because you can always try to apply to another lender.

Now, the good news. It's not necessary to become a local resident to be allowed to buy a property. English is one of the two official languages on the island, so you don't need to translate your papers and ask an interpreter to accompany you to the bank.

The easiest way to avoid any obstacles and accelerate the process of getting the mortgage is to hire an experienced advisor. This professional can help you with the paperwork and check the legality of each step. They will negotiate the most lucrative rates with all the parties involved.

Tips on Selecting a Bank

Around 20 banks operate on the island and most of them are international. To become their client, you need to be aged 18 or older and have a registered address in Malta.

Most institutions cater to both individuals and legal entities. If you're planning to run a business on the island, you probably won't need to open accounts in two different banks.

The set of documents for opening an account can differ from one establishment to another. Be ready to provide references from foreign banks whose services you've used.

Probably, you'll be allowed to submit your application online. But to finalize the process, you'll be asked to visit the branch in person. Please schedule an appointment in advance.

Some banks don't charge a fee for the fact of opening an account. However, most of them charge administration fees.

For residents, the process of opening a bank account is usually faster and simpler than for non-residents and the conditions can be more lucrative. The most common way of becoming a resident (and then, if necessary, a citizen) is to invest in property.

Step-by-Step Guide to Getting a Mortgage

To apply for a mortgage as a foreigner, stick to this scheme:

Prepare the papers.
Open a bank account in a local institution.
Gain permission from the Central Bank of Malta.
Choose the property.
Get approval from the lender. It will remain valid for a limited period, such as half a year.
Buy mandatory life insurance from a local provider.
Sign the mortgage agreement.

After that, feel free to finalize the purchase.

Alternatives to Mortgage Malta

Apart from regular mortgage offers, you can consider a bridge loan or a buy-to-let one.

The target audience of bridge loans is people who have properties that they're planning to sell to buy new ones. However, they haven't finalized the sales deal yet. The bank can give you a loan — and you'll pay the money back as soon as you sell your old house or apartment. Nearly all banks on the island offer bridge loans. Typically, they involve a monthly interest rate.

Buy-to-let offers were invented for people who'd like to rent out their properties. The part of rental will be used for loan repayment purposes. When calculating the terms, the bank will add the rental income to your employment income. It's a good option for those whose salaries are not too high.

Please mind that foreigners aren't allowed to rent out properties located outside of SDA unless they get special permission. The maximum amount of income tax rate for such a business is 35% — but usually, it's around 15%.