Stricter terms for home loans in Malta

Stricter terms for home loans have been introduced across the board as a result of a recent Central Bank directive aimed to establish “minimum standards and create a level playing field” for banks.

Though the measure targets both first-time buyers and those seeking to acquire a second property for real estate, tougher conditions apply for the latter.

Sources in the banking sector mentioned that this move could be a sign that the regulators are worried about the increasing exposure to the construction industry

The Central Bank said that the objective of this measure was to strengthen the resilience of both borrowers and lenders against potential build-up of vulnerabilities which could result in financial losses for both

What are the new terms?

First-time buyers

Borrowers need to have at least 10% of the sum to be loaned to be eligible.

The value of the monthly instalment cannot exceed 40% of the applicant's monthly income.

The loan has to be paid within 40 years or upon reaching retirement age, whichever comes first.

Borrowers purchasing a property for the value of up to €175,000 are not subject to the restrictions of this directive.

10% speed limit – this allows banks to have some leeway on the minimum deposit required whereby it may request a lower amount in 10 out of every 100 loans issued.

Residential Real Estate

Borrowers need to have at least 15% of the sum to be loaned and by the second year they must pay 25% of it.

Monthly instalment cannot exceed 40% of applicant's monthly income.

Loan has to be repaid in 25 years or at retirement whichever comes first.

20% speed limit – banks can request a lower deposit in 20 out of every 100 loans issued.