Brian,
Hostels would be a good option if you're concerned about the budget. You might consider getting an inexpensive membership to HI Hostels as they have properties in many places around the world (including Malta). A membership provides slightly cheaper costs. As with any Hostel stays, don't forget to pack a towel, flip-flops for the shower and a small but robust padlock for the lockers. Here's a link to their website - https://www.hihostels.com/destinations/mt/hostels . There are probably independent hostels there also, but I didn't check.
I'm not sure whether your pass covers ferries in Malta? This information from their website.....
" An InterRail global pass also gives free travel on Superfast Ferries, Minoan Lines & Blue Star Ferries between Italy (Bari, Brindisi, Ancona or Trieste) and Greece (Corfu, Igoumenitsa or Patras for the train to Athens). A few euros for port taxes needs to be paid, and cabin berths are extra. Superfast and some other ferry operators charge a small summer supplement (about €10 or so), you pay at the port. An InterRail pass also gives a significant discount (usually in the region of 30%-50%) on normal fares for some other shipping operators - for example, Silja Line (Stockholm-Helsinki), Limadet Ferry (Malaga-Tangier), SNCM (France-Corsica). There is no longer any InterRail discount on Trasmediterranea (Barcelona to Ibiza, Majorca & Minorca and Algeciras to Tangier)."
This website may provide some answers for you - https://www.lonelyplanet.com/malta .
You may want to buy a copy of the Lonely Planet Malta & Gozo guidebook, as there's a lot of good information there. This is probably also available in Kindle E-book format, if you'll be travelling with an iPad or other electronic device.