The Ultimate First Time Buyer’s Guide
Property has always been one of the soundest investments one can make. It is stable, appreciates over time and is a forced way of savings. It provides stability, credibility and security to anyone who takes the step of purchasing a property. One thing to keep in mind is that it is a long-term commitment.
So when buying your first home, it is not just buying a roof over your head, but also an investment towards your future. As this will be one of the biggest and most important decisions of your life, purchasing your first property merits some serious consideration.
We have put together this guide for first-time-buyers, which will take you through the whole process of preparation, qualification, and legal issues that you will have to deal with when buying your first property. While the process may seem daunting at first, it is actually a relatively straight-forward exercise, even more so when you get the guidance and assistance from a company like ours – with a rock-solid reputation. Who knows? In the end, you might even wonder why you have not done this sooner than later.
So where do we start? One of the most important things to remember is the earlier you can afford to buy a property when you start your career, the bigger the rewards will be when you retire.
Before you contact an agent and start looking at properties, there’s some homework you can do at your leisure. At Frank Salt Real Estate, we can assist in making the buying process as smooth and easy as possible. No matter what your taste or budget, we will help you find your dream first home. We suggest you have a look on our website as to what is available in your price range.
- Finding the right estate agent to help you out
- Determining what budget you can afford
- How to get a home loan
- Pre-qualifying as a first-time buyer with your bank
- Should you buy a new property or a resale?
- Picking the right location
- Coming up with a checklist for your dream property
- Things to look out for when viewing properties
- Is there a right number of properties to see in a day?
- Planning for your future
- What to do as soon as you find the right property
- How to go about putting forward an offer
- The role of a notary
- The promise of sale (konvenju)
- Applying for a home loan
- Stamp duty payable on your property
- The energy performance certificate
- The final contract
1. As A First Time Buyer, I Need Help, Assistance and Guidance From a Professional Real Estate Company with a Stellar Track Record!
It’s plain and simple: we are here to help you through the complicated and stressful process of buying your first home. Frank Salt Real Estate has been around for more than 50 years and over this time we have helped thousands of first-time buyers find their starter homes. As one of Malta’s oldest and most trusted real estate group, we have a track record and reputation we are proud of. We started out small as well, but our ethics, service delivery and professionalism has helped us to grow over the years to the biggest real estate group in Malta. With our collective experience, successful track record and sales representatives that covers all age and income groups, we can assure you that with us, not only will you find a home that suits your needs and budget, you will also find an agent that you like, trust and enjoy the house-hunting process with. Representing you as a first-time buyer, our agents can take the heat, the pace, negotiate the best deals and make the experience exciting, rewarding and ultimately far less stressful for you.
We have unlimited experience in dealing on your behalf with the demands of sellers, developers, banks, architects and notaries. We are trusted by all of these entities as the professionals and it is therefore no wonder that with us by your side, you will get what you want a lot sooner. Let us help you, guide you and assist you…after all, we have been doing this for more than half a century!
If this is not enough, Frank Salt Real Estate has also compiled an exciting package deal with truly exceptional offers only available to First-Time Buyers that will save you a good amount of money that you can invest in your new and first home! Make sure you check out our programme for First Time Buyers – it will be worth your while.
2. Right, Let Me See What I Can Afford to Spend on Buying a Property of My Own
Work out a budget and see what is your current income and expenses. Make sure you have some money left over to enjoy living in the home that you can eventually afford.
Some very important points to consider for inclusion in the upfront expenses (that is cash in hand) when buying a property are:
- A deposit of 10% of the total value of the property you consider buying
- 1% of the stamp duty costs (with the remaining % to be paid on the day of signing the final purchase agreement or contract)
- The architect’s fee for inspecting the property of your choice
- The notary’s fees
- Home Insurance
- Contents Insurance (This is optional)
- Life Insurance (this is mandatory in the case where you apply for a bond or loan on the remainder of the purchase price, should you not pay for the property in cash/the full amount)
- Remodelling and upgrading costs (if not buying new)
- Sundries (such as electricity and water accounts to be set up, WiFi etc)
When you have a good idea of what the total of these costs amount to, it is time to set up an appointment with your bank next, to see what loan options they have for you. We explain the whole process later. This is only applicable in the case where you require a home loan to cover the remaining 90% of the purchase price.
With interest rates being extremely favourable, the chances are that paying back the interest on a home loan will amount to less than renting a property which you may currently do.
3. Tell me Briefly How to Go About Getting A Home Loan
In almost all cases, banks are happy to grant loans of up to 90% of the purchase price. If you have a good credit record, you may be able to negotiate a preferential interest rate: simply ask for this to be considered during your application and always shop around. Repayments are usually calculated over a 40-year period or your retirement age, whichever is first.
Good news for first-time buyers is that at present, the usual 5% stamp duty applicable on the first €175,000 of the property price has been wavered by the government to help first-time buyers, but as long as the sale is registered before the end of 2020. The whole process of how to go about applying for a Home Loan is explained under point 15 in full.
4. It is Worth My While Getting “Pre-Qualified” as a Potential Buyer?
YES, Absolutely. It is a good idea to open discussions with you bank in the case where you require a home loan and even get it in writing what they are prepared to loan to you as a first-time buyer. Nothing is more disappointing than finding the home of your dreams and then just to find out that you cannot afford it or do not have the approval from the bank for the loan. This will also set the agent and seller at ease to know that you already have done your homework and clarify the search process for finding you the right property. Getting pre-qualified is no guarantee you will get a loan to that amount or a loan at all, but it will be a very good start to the process.
5. Now That I Know How Much I Can Spend, Do I Look At Buying Pre-Owned, New Or Off-Plan?
Off-plan and new-build is often a good choice for first-time buyers as new developments are constantly being constructed and may give you some time to save up extra cash to help with buying furnishings for your soon-to-be new property. One can expect a pre-construction saving of up to 10% buying off-plan and these are usually completed within 24 months. Property developers are also more open to negotiating a better deal for you, so if you can wait a while after putting down a deposit, this is a good way to go.
With existing or pre-owned properties, often called resales, the benefit is you know what you are buying: you can do a physical inspection in situ, point out any flaws and ask questions from neighbours and tenants who may be living in the property. Many people prefer this version of buying a property, as it does not challenge one to visualise something that’s only on paper: what you see is what you get.
6. What Do They Mean by Always Mentioning The Importance of “Location, location, location”?
People either want to buy in an area familiar to them and close to family, or want to make a clean break and re-invent themselves with a new home in a new location. Either way, most of us know where we want to live but sometimes it comes down to where we can afford to live! Sea views, being close to beaches and living in some of Malta’s most desirable neighbourhoods comes at a price.
Some questions regarding infrastructure to ask when looking at a property’s location:
- Is it near or on public transport routes and central links
- Is it near schools and day-care centres
- What type of shops and restaurants are located in the area
- Are there doctors, dentists and hospitals in the area
- What is the average age of residents in the area
- What are the noise levels like? Is it too close to traffic areas? How is the parking issue?
- How easy or difficult is it to get to the property from work or the other way round?
If you really like a property, make sure you visit it at different times of the day or week to get a clear picture of what it is like living there, before buying. No-one likes surprises!
7. So How Do I Find The Property That Is Right For Me?
As most people do not have time to launch a full-scale, full-time hunt for property, most make use of the services of a reputable estate agent to do it for them. If you instruct your agent to the best of your ability and arm them with all the criteria that are important to you, they will put together a selection of property options that fits your brief. Apart from the location and type of property, keep the following in mind and be clear about it:
- The ideal number of bedrooms and bathrooms you want
- Parking spaces and or garaging
- Whether terraces, balconies and patios is a must
- If you are prepared to renovate and have the budget for it?
- The choice of property preferred: brand new, pre-owned, furnished or unfurnished
- Whether proximity to work, schools and churches are important
- Demographics such as the average age of residents you will feel comfortable having as neighbours
- What the maximum age of a property should be and whether you prefer modern and contemporary or heritage, classic and historic
- Most importantly, be realistic and mention absolute no-no’s and turnoffs you see as deal breakers in a property
Keep in mind that we all dream big and want the best, but being near your work or close to your parents may be more important than having an extra bedroom at the cost of having to commute an hour longer each day.
8. Ok, Now I Want To Start Viewing Properties!
Once you have a shortlist of properties you like, contact the agents representing these properties or hand it to your chosen agent to act on your behalf with other agents. This will be a wise move, as this is their daily business: they know the area, the market and may even have properties to show you that have not been posted as available on the market yet.
Once you have an appointment to go and view properties, take the following with you:
- Measuring tape
- Ask for permission to take pictures
- Also measure the distance of travel to some of your favourite landmarks, work etc
Upon arriving at the property:
- Look at the street parking situation
- Make a note of the time of day and the congestion
- Walk around the block to get a feel of the neighbourhood
- Ask about additional fees such as Condominium and Administration fees
- Make notes of anything that needs fixing or that you have to spend money on
- Look for signs of damp, cracks or peeling
- Ask the owner to confirm if flush toilets and hot water cylinders/boilers are in working order
- Check air conditioning units, stoves and fridges, washing machines etc. are all in good order
- If you are planning to make use of any existing furniture, see if this will fit through doors and fit in places where you want to place it, whether you have to hire a lifter for your potential move
9. How Many Properties Should I See In A Day?
As many as you like, but for starters, we recommend not more than five per day as it will become difficult to differentiate one property’s finer details from the other after a while.
Once you have been out with an agent viewing a few properties, most buyers will instinctively know when a property is right for them. Be clear as soon as you can whether you like it or not.
Once you have narrowed down your search, make a list of your favourites and ask the agent to see the property again. Preferably view it at a different time of the day to get a good impression of the surrounds, traffic in the area, light in the rooms and noise levels.
10. What do They Mean by “The Importance of Planning Ahead for the Future” When Buying?
Once you have your budget confirmed and start looking at properties you can afford, remember buying is a long-term investment and you have to factor in that you will be living there for some time to come. You will have to think about room for growth: a partner, starting family, possible work-from-home scenarios and more. All this will mean that for example, a once compact and cosy apartment for a single person may become a stressful environment with several people sharing the space. Literally allow for some room to manoeuvre, as this will see you through many a year of happy living in your new home.
11. I Have Found “THE ONE”! Now What?
First, congratulations on narrowing down a probably vast selection of properties to the one you really want.
Here are your next steps:
- Inform the agent that you are ready to make an offer
- Choose a notary
- Choose a bank if you need a home loan and then think about making an offer!
12. What Important Considerations are There Before Putting in an Offer?
- Never be impulsive, as this can cost you dearly.
- Be clear-headed and sleep on it before making an offer on a property. Make sure it fulfils all you requirements and above all, make sure you are paying a realistic price.
- This you do by asking for a CMA (Current Market Analysis) of similar properties that recently sold in the area.
- Ask how long it has been on the market and if there were any other buyers interested or if anyone made an offer as well.
- Take a specialist such as an architect with you on the final inspection to assess cost, time and effort in the case of any warranted repairs and use it as a bargaining tool to lower the price.
- Do not ever overextend yourself by exceeding your budget limit.
- Make it very clear that your offer is based on the approval of a home loan, in case you are applying for one: this should absolutely be noted and written down as the primary condition of acceptance in the Offer To Purchase Agreement.
13. My offer has been accepted! Now What?
Draw up the Promise Of Sale (Konvenju) through your notary. This will be a legal and binding contract with conditions set out and agreed upon between you and the seller. It will determine a date to proceed to the next step to sign the final contract and also allow time for experts to investigate and double-check everything about the property, that it is sound and secure.
Just So that I Know, What Does a Notary Do, Exactly?
A notary will:
- obtain sellers’ responses to questions such as who owns the area of land and its boundaries,
- check whether there are any legal proceedings to do with the property or land,
- see what type of ground rent there is,
- see what fixtures and fittings are included,
- be responsible for searches on the property,
- check copies of any guarantees on the property,
- check details of planning permissions,
- check building regulation certificates,
- check that the seller really is the owner of the property,
- prepare to transfer the title in your name,
- pay stamp duty tax on the property.
If possible, insist that the property is taken of the market so your purchase will not be compromised by someone coming along with a better offer. Note that sellers may not be willing to do this if your offer is subject to a bank loan and understandably so. So make sure your application for a loan is processed with your bank of choice as soon as possible.
14. What do I Need to Know Before I Sign “The Promise of Sale (Konvenju)”?
Before signing the Konvenju be sure to confirm the following:
- The agreed price.
- If the property is Freehold (with no Ground Rent) or if there is Temporary or Perpetual Ground Rent.
- What fixtures, fittings and pieces of furniture are included in the price?
- How payment will need to be affected and in what stages? (Do you need to apply for a loan?)
- Are there any works to be completed by the owner?
- What are the Terms of the Promise of Sale (Subject to the approval of a home loan, a permit etc.)?
- The Deposit, on account, usually, the equivalent to 10% of the agreed purchase price, paid as a sign of goodwill by the purchaser and of their intention to appear on the final deed of purchase.
- When will the final deed be signed?
- In case of a property forming part of a block, what other conditions apply, such as the installation of air-conditioning units and other fixtures, condominium obligations, timeframes for delivery, etc
A promise of sale agreement unless otherwise agreed, is valid for three months. This is something that you would need to determine with the vendor, the bank and the bank (in case if you are taking a home loan).
The deposit is normally not paid directly to the vendor, but kept by the notary, till the signing of the final contract. The deposit is forfeited in favour of the vendor if the purchaser does not appear on the final deed without a valid reason at law.
Here are the next steps between signing the Promise of Sale and the Final Deed (The Contract)
- The notary (employed by you, as the purchaser) will, within three weeks of signing the promise of sale agreement, register the said agreement with the Commissioner of Inland Revenue and pay 1% of the sale price on account of Duty due by the purchaser on the final deed of sale.
- The notary will carry out searches on the property and verify the clear legal title, assuring that there are no outstanding debts, hypothecs or liens on the property.
- The purchaser must honour all the conditions mentioned in the promise of sale agreement, eg. submitting the bank application for a loan in a timely manner, ascertaining that the property is covered by a building permit etc.
- The vendor, in turn, must honour all the conditions mentioned in the promise of sale, which apply to him or her, eg. Completion of works agreed upon etc.
At Frank Salt Real Estate we actively follow-up these procedures to ensure a smooth, final transaction of the property.
15. Hang On, One of My Conditions of Sale is Getting a Home Loan! What Does The Process of Applying for a Home Loan Involve?
It is presumed that you have a bank account and a bank of choice through whom you will apply for a home loan. Several home loan options are available with most banks, so choose the one that is right for you.
First, a Sanction Letter will be drawn up by the bank and be handed to both parties prior to any money being released for exchange. In this document, the terms of awarding the forthcoming or pending loan amount will be explained. Should your institution of choice require collateral to back up the loan amount, the latter will be noted and explained in this document as well. It will also cover the interest amount applicable, the duration of time for repayment of the amount, as well as sundry costs and any fees that will be charged for facilitating the loan.
Documents you need to apply for a Home Loan will likely be:
- Your application itself
- Bank statements from the bank covering 3, 6, 12 or even 24 months depending on their criteria
- Recent payslip and FS3
- Architect’s/Manager’s estimate of the property value based upon an on-site inspection
- A land registry copy of the site plan of the property
- A personal proposal of what you require in regards of the loan
- An outline of any expenses regarding the purchase of the property
- Character reference unless customer is already an account holder
- Photocopy of ID card
- Copy of the preliminary agreement/promise of sale
- Due diligence background documentation regarding the proposed buyer and seller
Set fees and other possible fees:
The costs can quickly mount up, so try and keep the process uncomplicated and make as little changes as possible. You may be charged additionally for each amendment or change made during the process such as the processing of all paperwork, legal, searches and updates, anything done by the architect, progress reports, commitment, waivers, postponements, cancellations, anything by or from the land registry, conservation privilege, the closure, rescheduling, changes in the conditions of the sanction, anything on the advising of irregularities and even related third party fees.
At The Frank Salt Real Estate Group, we can assist and advise you regarding home loans. The whole process of representing buyers and sellers is our business; it is what we do best. This includes looking after you through the process of applying for a home loan too. As any of our agents and representatives on how we can be of service in this regard, as we have long-standing relationships with all the major banks.
Once you have completed the home loan application process and gained approval for the loan amount, your notary or bank may at this stage ask that you to hand over a deposit, to be kept in trust, as a sign of goodwill. Do not be hesitant to do this, as it shows everyone involved that you are serious and mean business. During this time, all parties will conduct comprehensive investigations into the ownership and legalities, all steps which are set out in detail later for you reference.
16. Another Thing: I’ve Heard a Lot About Stamp Duty: What Stamp Duty Applies to Me as a First-Time Buyer?
In normal circumstances when the property being bought is to be used as the purchaser’s ordinary place of residence, stamp duty is normally charged at 3.5% on the first €150,000 and 5% on the remaining value.
Thanks to the current incentives being offered by the Malta government for First Time Buyers, you get away with paying no stamp duty on the first €175,000 of the property value and you only pay 1.5% on the remaining amount (up to a property value of €400,000). Any other amount above €400,000 gets charged at 5%. This enticement is only valid to first-time buyers who sign the property contract till end March 2021.
It is good to keep in mind that no stamp duty is charged on the value of the movable property (furniture and fittings) being transferred with the immovable property.
Part of the stamp duty (generally 1%) must be paid on signing of the preliminary agreement. The balance is then settled on the signing of the final contract.
17. Before I Sign the Final Contract: What Exactly do they Mean by “Energy Performance Certificates”?
Property owners must ensure that when buildings are constructed, sold or rented out, an EPC (Energy Performance Certificate) is shown to the prospective new buyer or tenant and handed over to the buyer or new tenant on the date of entering the contract of promise of sale or rent agreement.
An EPC is a requirement of the EU Directive, namely the Energy Performance of Buildings Directive (EPBD) and Maltese Law, specifically the Energy Performance of Buildings Regulations (EPBR) of 2012 (LN376/2012).
The Energy Performance Certificates inform potential buyers about the energy performance of a building unit and gives recommendations for cost-effective improvement to a better energy efficiency class. An EPC rates the home’s performance in terms of energy and it is similar to the energy label on electrical appliances.
An EPC is carried out by an Energy Performance of Buildings (EPB) assessor who is registered with the Building Regulation Office (BRO) which is the office responsible for the implementation of the EPBD in Malta.
The EPB assessor inspects the property and assesses the building. The assessor then calculates the energy use rating of the building and issues a registered EPC. A list of registered assessors is available on epc.gov.mt. The BRO charges a €75 registration fee for each certificate registration. There is no set fee for an EPC as it is up to the assessor to set the price.
An EPC is valid for 10 years from the date it is issued. The same EPC still holds if the property is placed on the market within those 10 years provided there are no substantial changes to the building which could affect its energy performance.
An EPC assesses the geometry, construction and finishing material of the building such as double/triple glazing, ventilation, insulation and shading elements. It also takes into account lighting, hot water systems, air-conditioning and renewable energy systems like, for example, PV panels.
The assessor then proceeds to give recommendations for an energy efficient building. Recommendations are worked out specifically for each building and officially given to the building owner in the certificate. The owner is not, however, obliged to implement any of the recommendations set out by the assessor.
An owner who fails to produce the EPC to the BRO, when requested to do so, may incur a fine ranging from €500 to €5,000.
18. Finally, It is Time to Sign The Final Contract!
After everything the process involved such as planning, budgets, visits, applying for loans and more, this is the stage where you will be asked to sign the final Deed of Transfer/Final Contract, whereby you will become a homeowner!
Make sure to ask your agent and notary to oversee and ensure everything is done by the book and that you are aware of all the facts before your final signature.
If a bank loan is required for the purchase, you get to sign the final deed at the bank through whom you procured the home loan. Otherwise you normally meet up at your notary’s office.
The contract of purchase is read out, and if all is in order, all the parties concerned sign it.
You then pay the vendor the balance due, i.e. the purchase price less the deposit already paid when the promise of sale was signed.
You will also need to settle any other outstanding payments concerning the purchase, including the stamp duty, notarial fees and cost of searches. Once this has been done, the contract will be registered by the notary with the Public Registry. Now will be the time where you take possession of the keys and the property and make it your home.
Congratulations, You are Now a Proud Homeowner!
19. Don’t miss out on our super offer for First-Time Buyers
We hope that you have found our First Time Buyers Guide useful. We have also compiled an exciting package deal with truly exceptional offers only available to First-Time Buyers that will save you a good amount of money that you can invest in your new and first home! Make sure you check out our programme for First Time Buyers – it will be worth your while.
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