What happens if the bank refuses your home loan in Malta?

The protection depends on the clause being there

As Dr. Laferla is careful to spell out, this only works "if the promise of sale is subject to a bank loan and it is inserted as a clause in the promise of sale that this promise of sale is subject to a bank loan." The subject-to-loan clause has to be actually written into your Konvenju — it is the specific mechanism that ties the purchase to your financing.

What happens when the loan is refused

Where that clause is in place and, in his words, "the bank loan is not issued, then the promise of sale will fall through." The condition the agreement was made subject to has failed, so it does not proceed to the final deed.

Both parties revert to their original position

As Dr. Laferla puts it, "the parties will go back, will revert back to their position before they have signed the promise of sale." The seller is free to put the property back on the market, you are released from the commitment to buy, and — because you withdrew for a reason the Konvenju itself recognises — your deposit is returned rather than forfeited.

Why you must get the clause in

The whole outcome turns on that clause. Without a subject-to-loan condition, a buyer who is refused financing is not automatically released — they could be treated as walking away without a valid reason at law, which puts the deposit at risk. That is why it is one of the most important clauses a notary drafts for a financed purchase.

Sources

• Dr. Michael Laferla — Yitaku Asks video (subject-to-loan clause; promise of sale falls through; parties revert to their pre-signing position)
• Civil Code of Malta, Chapter 16 — Article 1357 (conditional promise of sale; deposit)
• Maltese notarial practice — the “subject to sanction of loan” clause and its effect when a loan is refused