Before deciding to purchase a property, it would be wise to shop around to get an idea of how much you can borrow. Banks will normally take your gross annual income as a base to determine the amount that you can borrow. As a maximum, the repayment on your home loan should not normally exceed 25% to 30% of your gross monthly income. The lender will typically ask you to pay an agreed percentage of the purchase price which will usually be up to 10% (the bank will lend you the difference).
When you eventually find your ideal property and the best deal on your loan, you will have to fill in a loan application form. At this stage, the bank will ask you for various documentation, such as the following:
- Your I.D. Card/s or passport/s;
- Evidence of income, FS3 forms (overtime and part-time work may not be taken into consideration) and/or tax returns (as the case may be). The bank will not normally rely on non-official documents which may attest income you may be earning;
- Statements of your bank account, if you bank with other institutions (other than the lending bank);
- Records of any financial commitments (existing loans or credit advances);
- In case of non-residents, copies of evidence of income, settled utility bills, Bankers reference and bank statements are required;
- Architect’s property report and valuation;
- Architect’s estimate of costs (where applicable);
- Building permits, layout plans and site plans (where applicable);
- Preliminary agreement/deed of acquisition;
- Ground rent receipts (if applicable);
- In case of request for a re-finance, copy of sanction letter and loan statements;
- Other documentation as required by the bank.
If your home loan is approved, the bank will issue a sanction letter with the terms and conditions governing your loan. The sanction letter will outline the amount and purpose of the loan, the rate of interest being charged, the monthly repayments, the duration of the loan (which tends to range between 35 to 40 years) and the APRC. The sanction letter will also define the legal and processing fees that will have to be paid (if any), early and/or late repayment fees and any commitment fees (if applicable). The type of security required (such as life and home insurance and hypothecs on the property being purchased) will also be clearly explained. Finally, the sanction letter will also include an explanation of the ‘events of default’ and the course of action that will be taken by the bank in such instances.
If you decide not to take a loan with a bank after a draft sanction letter has been issued, your bank may decide to apply a fee for the administrative work it incurred for processing your loan application. Double check with the bank about this charge to avoid surprises.
Pre Contractual Information (HOME LOANS)
The General tariff of charges provides information in a standard format. Borrowers may be offered different terms and conditions tailored to their individual situations. The lender, once it has received information on the borrower’s needs, financial situation and preferences, provides the borrower, free of charge, with the European Standardized Information Sheet (ESIS). This form sets out the information on the customized offer that the borrower can use to compare with other offers available in the marketplace.
The borrower must be given the ESIS without delay, before committing to any loan contract or offer. The ESIS must also set out the terms and conditions of the contract based on the borrower’s characteristics and needs.
Before signing the loan agreement, the borrower has the right to a reflection period of at least 7 days to compare the different offers, to consider their terms and conditions, and to make an informed decision.
The 7-day period starts when the borrower receives a binding offer from the lender. During this period the offer is binding on the lender and can be accepted by the borrower at any time. The offer must be accompanied by the ESIS, unless the ESIS was provided earlier or the features of the offer does not differ from the information contained in the earlier ESIS.