First time buyers. Where do you start from?
Where do you start from?
Many might think that buying a property is complicated and scary. To put your mind at rest, buying a property in Malta is safe and not that complicated either. However, some care must always be taken and most especially if you do not have all the expertise to do it alone, it is of utmost importance that you engage a professional agency and consultant that can guide you all the way through.
Many times, the first instinct is to view properties to see what can be found on the market, before an appointment with the bank to see whether one is qualified for a loan and the limit of loan one can opt for. Many times when priorities are not set right, buyers end up disappointed.
Our advice would be to start from taking stock of the financial outlay that one can afford, or else from the amount of money one is ready to invest. This means that ideally the process starts from at least meeting one bank to get an idea of affordability.
Pay a visit to the Bank
Visiting a bank will certainly help you decide the amount of money that you can invest in a property. Banks do offer different products that can help you achieve your goal. Therefore, we strongly suggest that more than one bank is visited. Different products offered from time to time may mean that you might be able to have a larger sum available or else maybe benefit from more advantageous rates.
Therefore, visiting one bank prior to start viewing any actual property is a must. After this meeting you should be able to know approximately the amount of repayments. Always keeping in mind that banks most of the times finance up to 90% of the purchase price and therefore you will need to finance 10% of the purchase along with Stamp Duty and notarial fees. Moreover, the government issues schemes from time to time which will make affordability less stressful.
If you require a bank contact and do not know whom to contact than you can “contact us” and we will gladly fix an appointment for you with any bank at any branch you require.
Knowing the approximate amount of repayments will enable you to check what you can afford considering your life style. Make a list of your monthly expenses such as petrol and entertainment and also a list of the yearly regular expenses such as car insurance premium or presents. Always leave room for extraordinary ones while doing so.
These expenses, together with the amount of repayment given by the bank should leave you in a comfortable situation.
You are now able to set up your budget more precisely and can start looking into what property options can be considered.
In your budget always keep in mind the Stamp Duty, notarial fees and deposit which are usually your contribution towards the total cost.
You also need to leave a balance to buy furniture unless the property that you will purchase is furnished or else you might move into the propety within a number of years which would allow you to save for it later on.
An easier way home
This is the right time to make a visit to our office. Together we can discuss your list of priorities, starting from the basics such as number of bedrooms and area of choice, to more sophisticated requests such as views or a pool, naturally always respecting budget parameters.
Before leaving the office we set up a couple of appointments in line with the number of possibilities chosen, giving way for the property hunt to begin. Rest assured that our team of professional consultants will give you all the necessary support and guidance through out your journey.
Taking a Decision
Some people are very quick to decide whilst others may take longer. We recommend never to take rushed decisions. When you think you have found a place you like, view it again a couple of times. This in view that sometimes with the excitement, important details may be ignored. If the same enthusiasm is felt over and over again, then the property is the one for you.
Once the property is chosen, we will ensure that as intermediaries we negotiate, best price and terms possible in order to seal the deal. It is very important that if there is a strict budget, this is not stretched too much as the bank repayments will be a burden and a struggle to maintain. If this is not the case, then the decision will be smoother.
Further check lists
- Ground rents if any.
- Detailed list of finishes (if the property is being sold finished and is not finished at the time of purchase).
- Detailed inventory if the purchase includes items of furniture to know what is being taken away and what items you are purchasing with the property.
- Yearly association fees if buying in an apartment block. Copy of plans and permits.
Why should you always appoint an Architect before you proceed?
If the offer is accepted by the seller and you move on to sign a promise of sale, ideally before you sign you take an architect who can advise you on permits in order to ensure that what you are buying is in line with permits or else if changes are required, what is the possible outcome of any such changes.
An architect will also look into the state of repair of the property. Some properties might have some visible cracks or other minor damages such as damp patches or signs of water incursion, which the architect will be able to look into and advise whether it can be treated or else whether serious repairs need to be affected, which then would need to be taken into consideration of the purchase price.
You will also require the architect to eventually fill in the documents for the bank if a bank loan is being arranged. During these visits notes can be taken, so in the event that the promise of sale goes through then you would be able to present these documents to the bank for the issue of the sanction letter.
In the event that you do not know of any architect, needless to say we can suggest one ourselves and you would be free to choose whoever you think is best.
If for any reason you are unable to take an architect before you sign the promise of sale, then it would be ideal to include a condition in the promise of sale, making the deed subject to an architect’s visit, say within 7 days.
The Promise of Sale ( Il-Konvenju)
Needless to say, you must choose a notary before you can sign a promise of sale. You can ask for an approximate estimate of the fees charged especially if you never worked with this notary before, so as to ensure that you are always aware of the full extent of the total monetary outlay. If you have no one to assist you, we can always suggest different options for your choice and you will be able get estimates yourself.
With regards to the total bill, you have to be aware that apart from the notarial fees, there will be other expenses such as research, for which the notary will be unable to tell you the exact cost because these will vary from one contract to another, depending on the depth that a notary would need to go into and also the volume of transactions made by the company or owner you are buying from. Another fact that would affect the final bill is, if you are using the bank to make the purchase. In such an event two contracts effectively take place, one with the bank and another with the owner.
Although this is not requested by law, generally, the deposit amount requested by sellers is usually that of 10% and this is either given to seller immediately or to the notary for safe keeping depending on the agreement. Most of the time, when it is given to the notary, a date during the promise of sale is established by which time the notary will release the deposit to the vendor. This is usually tied with either the notary having concluded the searches or more often with the issue of the sanction letter from the bank, if the purchaser needs one.
Stamp duty is paid to the government when purchasing a property. There are a few applicable rates depending on the purchase you are making:
- 0% for first time buyers for properties up to €150,000
- 5% of the purchase price if this is your secondary property (i.e. not your primary residence).
- 3.5% for the first €150,000 and 5% if it exceeds the former sum, to second time buyers, purchasing their property as a main residence.
The Stamp Duty only applies on the value of the property. Therefore, if the property that you are buying includes a kitchen and other furniture items, one is to first find out the value of the items at the time of signing the Promise of Sale and separate this value from the purchase price of the property. The Stamp Duty is than applied on the purchase price.
20% of the total Stamp duty due is to be paid when signing the promise of sale as provisional tax, while the remaining sum, is to be paid on contract. This will be either 20% of 3.5% or of 5% of the purchase price, depending which rate is applicable to you as explained above.
For more details you can either consult one of our agents or a notary in order to guide you further.
Subject to Bank Loan condition
If a bank loan is to be taken into account then you must advise the chosen notary in order to make the deed subject to bank loan. A period of 30 days would be given, between the time of signing the promise of sale and the issue of the sanction letter.
If you require the bank loan and the seller does not accept, then our advice is to walk out of the purchase in view that if the sanction letter is approving and the bank loan is not granted for any reason, than you might end up losing the deposit if you are paying one.
It is very important to note, that it is the purchasers responsibility to advise that a bank loan has been approved or otherwise refused. If it has been approved, then the sanction letter must be handed over to the respective notary, while if it has been refused by the bank, you must ask the same bank to issue a letter noting such refusal and give this immediately to the notary so as not to jeopardize the deposit paid.
Plans and Permits / Subject to Permits condition
It is very important that you have the plans in hand before you sign the promise of sale. This will help you to note any discrepancy between the original plans and the actual property built. In the event of discrepancy always consult an architect. This could be either that the property is built not in line with permits and you will have problems to re-sell or that a simple sanctioning procedure would put everything back in line.
The plans need to be officially stamped by MEPA and must have the Sanity Approved Stamp to be valid. If you see none of these on the plans that you are presented with, then this is mearly a drawing and not the approved permits. You need to ask for the original plans and also a copy of the permits.
Make sure that if you have not seen a copy of the official plans and permits yet, the vendor needs to bring same to the signing of the promise of sale. We do recommend that you consult an architect with these documents before signing the promise of sale but if you have not yet done so then you must include a condition in the promise of sale, making the deed subject to an architects visit, say within 7 days.
During the signing of the agreement, you need to attach the approved plan to the promise of sale and mark clearly the property that you are buying. This would help in identifying the property being bought.
Needless to say, if you are buying through our offices we will be assisting you in all of this.
List of Finishes
If the property is not yet finished at the time of signing the promise of sale, then a list of the items which are yet to be finished needs to be attached. This is a very important document which will regulate the state of your property at the time of signing contract.
Therefore, it needs to be detailed in a way as to reflect the agreement you have made with seller. No item is to be left out since you will end up being at the mercy of the seller at time of contract.
The list to finish, must also include the finishing of the common parts. It is useless having the interior of the property finished to high standards when the common parts is still in shell form.
An example of a list of finishes is attached for your reference. Do not take this as the right one for your purchase, since every list of finishes will vary in accordance to the property being bought (LIST OF FINISH)
- Block main door in (wood or aluminum etc).
- Doors leading to apartments (Solid wood etc).
- Stair case in (Marble or Granite etc).
- Hand Rail in (Stainless steel or Aluminum etc).
- Lift (Make and Model if known).
- Fully functional electrical and water system (establish the number of plugs in each room, tv and telephone points, if air condition copper pipes will be installed etc).
- Floor Tiles laid (establish what kind of tiles such as full bodied gre`s or otherwise. The measurement of the tile example 50×50 or else the price that the vendor is spending).
- Bathroom fixed (including bath, shower, toilet, sink etc. Also describe what kind of tiles will be put in if you have already agreed on same. If you put a value for this you might also be able to change tile for a superior one and pay for difference always in agreement with vendor).
- Gypsum works ( list the works that need to be done if any).
- Balcony railings back and front (in example aluminum or cast iron etc).
- Internal apertures leading to rooms (in wood, if you know what kind of wood you can include this).
- External apertures (Front overlooking the street and those at the back overlooking the yard and other windows overlooking shafts etc, usually in aluminum or PVC, and very importantly, establish if double or single glazing).
Registration of the Promise of Sale
Notary will have to register the promise of sale with Inland Revenue before 21 days expire from signing. You will know that the promise of sale has been registered in view that you will receive a receipt (blue) for the amount of provisional Stamp Duty paid, from the inland revenue department.
At the termination of the promise of sale a contract is signed. If a bank loan has been taken out the contract is signed at the respective bank’s legal office.
During contract the property passes to the possession of the purchaser while the seller receives the outstanding sum of money. If 10% deposit has been paid, then the outstanding sum would represent 90% of the purchase price.
Furthermore, on contract date the remaining Stamp Duty is to be paid along with the notary’s bill. Therefore it is important that you ask the notary before appearing at the contract to let you have the outstanding Stamp Duty amount together with his bill as well, so as to ensure that you have the right amount of money available to settle these amounts.
During the contract, the document is read again for the last time before it is signed. It is very important to give particular attention to what is being read even if this is essentially a copy of what has been read in the Promise of Sale. However, one needs to understand that what is written in the contract forms the basis of the agreement.