How to get a mortgage in Italy to buy a property
When it comes to property purchase, mortgages are the most commonly used form of loan. This is true in Italy, just like everywhere else in the world, but… what about non-Italian nationals? Is a prospective foreign buyer allowed to ask an Italian bank for a mortgage?
A critical issue, by all means, that can really change one’s outlook on purchasing real estate in Italy… Well, the good news is that a foreign investor is by all means legally entitled to request a mortgage from an Italian financial. Just as there is no standing law, regulation or rule that forbids a foreign resident to purchase property in Italy, there is no law that prohibits a non-Italian national from requesting, and obtaining, a mortgage.
As elsewhere, Italian law and banking regulations maintain that any person, or company, that can exhaustively demonstrate his/her/its ability to indemnify a loan holds the right to obtain a mortgage.
There are different types of mortgages available in Italy. One can see a full comprehensive list, and all details, in the Bank of Italy’s Guide to Mortgages (click here for the online English version).
Basically, there are 4 types of mortgages:
- Fixed-rate mortgage – the interest rate remains unvaried throughout the mortgage’s entire period
- Variable-rate mortgage – instead of remaining set for the whole period, the rate is revised at pre-established intervals to correspond to variations in the market.
- Hybrid-rate mortgage – the interest rate can be altered from fixed to varied provided the conditions and time frames set by the contract are complied with.
- Split-rate mortgage – a mortgage agreement that comprises two types of rates, one fixed and the other variable.
Choosing what mortgage to apply for, and thus deciding what type of interest rate and payment terms one will be subject too, is up to the prospective purchaser. In general, this decision is made considering one’s financial situation and the current market conditions. In any case, all those intending to apply for a mortgage should carefully review options available, and compare the offers they receive from different banks. This because rates of interest and installment terms and rates can vary greatly from one financial institution to another, hence comparing alternatives is the only way to find one’s best option. Among the elements to evaluate, prospective applicants should pay close attention to the TAEG, Tasso Effettivo Annuo Globale, which is the Italian for APRC, the Annual Percentage Rate of Charge, the figure that exemplifies the total cost of the mortgage over one year, expressed as a percentage of the loan’s amount. The TAEG includes interest due as well as all other expenses implied, for example collection of payment, taxes, processing etc.
In compliance with Italian law all banks and financial institutions that offer mortgages must clearly state the TAEG in their General Information Sheet for Mortgage Customers, and make it public by publishing it on their website.
Yet, alas, being allowed to ask for a loan is one thing, and getting one, for a foreign buyer, another. Italian banks and financial institutions are, and have always been, very cautious and wary lenders, even where Italian nationals are concerned. This is mainly due to the fact that the great majority of Italian banks are not commercial enterprises, they are traditional institutes. Consequently, granting a mortgage is always a potential risk that many tend to avoid.
Unfortunately, this “ungenerous” attitude mostly affects foreigners, and not because of prejudice. What banks’ officials are concerned about is not being able to recover missing payments from abroad, should the beneficiary of the loan stop settling the due installments.
However, as it is allowed, a non-Italian investor has the right to apply for a mortgage and therefore should. The procedure, by the way, is quite uncomplicated and clear-cut. First and foremost, one submits one’s request to the bank, and the bank’s officials set to work to assess the applicant’s income, assets and proposed collateral and verify them to ascertain the applicant’s ability to repay the loan in the due installments. It’s basically what happens in any other country, and for any other type of loan: the bank examines the borrower’s credentials, to establish whether he/she is trustworthy.
To apply for a mortgage the prospective borrower will be requested to present a variety of documents and complete information forms.
Italian banks typically request:
- Valid current ID documents
- Residency Certificate
- Last Tax Return (to prove the source of one’s income)
- Good standing certificate
Should the foreign applicant have a bank account elsewhere, the Italian bank may also request a Reference Letter from the applicant’s other bank. In some cases, banks demand further detailed proof of one’s income (generally this occurs with employed persons), while those who are self-employed might be asked to provide their Chamber of Commerce certificate and/or registration to specific professional associations
If the prospective borrower is a company, the Italian bank commonly requests:
- Corporate Certificate
- VAT Information
- The personal IDs of shareholders that own 25% or more of the company’s shares
- Last Officially Deposited Turnover
Banks might also ask companies and individuals to supply specific information on the property they are interested in buying, for instance the preliminary contract, habitability certificates, deeds and even the floor plans.
If all documents are in order, and the bank decides that the applicant is creditworthy, the bank’s official in charge drafts a tailored loan proposal. Pursuant Italian law this proposal is drawn up on the standard ESIS form, the European Standardized Information Sheet, providing the prospective borrower with a very helpful tool: because all banks are required to use this form, applicants can easily and flawlessly compare different banks’ offers.
Plus, Italian law maintains that mortgage applicants are entitled to a “reflection period” equal to at least 7 days from the proposal date, a useful time span to evaluate the offer, ponder one’s decision and juxtapose the proposal with others one shall have received.
As regards the amount granted, a prospective applicant should bear in mind that there is no minimum – maximum rule for it. Generally, a financial institution will, however, establish a customized amount based on the property’s value and the applicant’s dependability. So is it impossible to estimate? Not really. Our experience teaches us that the highest sum one can get is generally about 50% of the property purchase price.
So, can a prospective foreign buyer hope to get a mortgage from an Italian bank to buy real estate in Italy? Definitely yes, especially if one relies on the assistance of an experienced local team. Aiming to provide our foreign clients with the help and know-how they need to fruitfully invest in Italy, our team of proficient lawyers and skilled advisors offers savvy local insight, comprehensive support throughout the process of obtaining a mortgage.
Let us help! We will be pleased to offer full, dependable, English-speaking assistance in all matters concerning your mortgage, and all-round advice in legal, fiscal and bureaucratic matters.
We’re specialized, and we’re here, on-site, ready to inform you about the available options and solutions, willing to prepare and collect the needed paperwork, to provide translations and transcriptions of the documents.
We’ll be glad to share our insider’s view, advise on the most suitable banks to contact, and do the homework for you, whenever you need us to!