'Banks keep rejecting my loan applications. Should I give up on home ownership?'

Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca,

I am a 26-year-old architect. I earn €35,000 a year in my full-time job, and for the past two years I’ve also worked self-employed on a part-time basis. My idea was to save up as much as possible for a deposit that would help me buy a property in Malta.

Saying there’s barely a spare minute in my week is an understatement, as I’m also working on Sundays.

When I first spoke to banks about getting a home loan, I was aiming to buy a €250,000 apartment. The banks told me I didn’t qualify for that amount.

So, I started working part-time on the side.

Now I approached the banks again, two years later and with more savings. But I again fell short.

The sort of properties that were worth €250,000 two years ago are now valued at €300,000 at the very least. And despite the fact that in terms of deposit I am almost there, the bank doesn’t recognise my part-time self-employed earnings as income, because they say I need to have made a €20,000 in profit over the past two years, which is hard considering that I am just starting out.

Meanwhile, many of my friends are buying with the help of their parents. That’s not an option for me. My parents did their best, but they can’t help financially.

To be honest I’m feeling quite down at the moment. If I wait another two years, I am sure property prices will continue going up. My partner already has a property, so I cannot buy it with her. And a property cheaper than that price-tag is well away from the place which I wish to live in.

Should I give up buying a property in Malta completely?

Looking forward to your thoughts.

Losing Hope

Luca responds: 

Thank you for having the courage to share your thoughts with me.

This has been one of the most common questions I receive from clients and workshop participants.

It is undeniable that property prices in Malta are increasing at a fast pace. I’ve been following the property market for years, and I barely remember a time when property prices went down.

The more incentives the government introduces to help people like you get on the property ladder, the more prices seem to rise in response. Not to mention the fees associated with buying a property, including stamp duty and notary fees. 

I understand your frustrations about bank refusals. Here are my thoughts:

1. Look into the Equity Sharing Scheme: By coincidence, this scheme has just been extended to those aged 25 and over (previously it was 30+), so there is a good chance that you’d qualify. Through this scheme you can co-purchase a home with the government and then gradually buy back the government’s share over 20 years. For first-time buyers like yourself, this could be a helpful alternative to get started without needing the full deposit upfront. It's capped at properties valued at €250,000, but it might a good first step for you. 
2. Consider a property at a cheaper price: I understand and respect your wish to buy in a certain place. But since you mentioned that your partner already owns a property, what if you live with her and try for a cheaper alternative when buying a property of your own? That way, you get on the property ladder and could rent it out while contributing to your partner's expenses.
3. Consider renting: If living with your partner isn't an option and you're determined to move out of your parents' home, I’d consider renting while continuing to save (if buying a property remains a top financial goal). Although many look down on renting as a waste of money, it can also offer flexibility, freedom, and fewer upfront costs. Don’t buy a property just because of societal pressure. Buy it when it aligns with your lifestyle, values, and numbers. To save money, consider sharing a rental with someone else. I know this may not sound ideal, especially when you're craving your own space, but it can be a helpful short-term step that eases the financial pressure and allows you to save more consistently toward your goal of owning a home.
4. Consider co-buying: This may not be the tradition here in Malta, but it is gaining lots of popularity in countries like the UK, and other European countries where getting on the property ladder alone is next to impossible. Buying a property with someone else obviously requires careful legal agreements, but at least you’d have a foot in the property ladder.
5. Consider investing: If you have dedicated all your money towards saving for a property deposit, I’d recommend starting to think about investing. Regular investing has the potential to increase your money over time thanks to compound interest. Start by educating yourself on the subject, maybe even from a financial coach if you require one-on-one attention, and then approach a licenced investment advisor who can help you better with your investment choices.

Don’t be discouraged. It is true that buying a property on your own has become more challenging. But with the right strategy, you can adapt accordingly and make the most of the current scenario.

I hope this helps.

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.