In Italy, as everywhere else in the world, mortgages are the most popular type of loan used to buy property. But are foreign prospective buyers allowed to get a mortgage in Italy? Can a non-Italian national desirous to purchase real estate in Italy ask a bank for a loan? And, many would probably add, is there any chance the financial institution contacted will say yes?
Indeed, a great many foreigners who choose to invest in property in Italy ask themselves these question, doubtful on the answer and on whom to contact for support and advice. Well, once and for all, yes! There is no standing Italian law establishing that foreigners are not entitled to a mortgage, and, actually, Italian banking legislation maintain that any person or juridical entity capable of proving his/her/its ability to comply with repayment of a loan is allowed to apply for, and hence has the option of obtaining, a mortgage.
However, foreign investors do often run into Italian banks’ general wariness in terms of lending. Because most Italian banks are traditional financial institutions, not commercial ones, the majority is really very careful, and strict, as regards borrowing policies applied bot to Italians and to foreigners. In addition to this generally attentive attitude, Italian banks are even, alas, more prudent and watchful where foreigners are concerned, because their officials worry about being able to due to recover missing payments.
Yet, seeing as the law enables non-Italian investors to do so, they should not hesitate to do so, even because submitting one’s application is quite simple and easy to process (quite similar to those used elsewhere), and Italian banking regulations provide for a verity of advantages. The first step is submitting a formal request to the bank/banks of one’s choice: this will include presenting a series of specific documents and fill in the forms required.
Buying property in italy: how to get a mortgage
Documents requested comprise:
- Valid current ID documents
- Residency Certificate
- Last Tax Return (to prove the source of one’s income)
- Good standing certificate
- Should the foreign applicant hold a bank account elsewhere, the Italian bank may demand a Reference Letter from it. In some cases, banks request 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
When the potential investor is a company, documents required include:
- Corporate Certificate
- VAT Information
- The personal IDs of shareholders that own over 25% of the company’s shares
- Last Officially Deposited Turnover
Once all documentation has been presented, the bank’s personnel starts ascertaining the applicant’s assets, income, and offered collateral, and checking them to assess his/her capability to repay the loan.
In addition to the above, some Italian banks might also request the prospective borrower (whether a company or person) to provide detailed information on the real estate asset they intend to purchase, for instance copies of the preliminary contract, deeds, habitability certificates etc.
Once the applicant has presented all the documents, and provided these are exhaustive and complete, the banks’ official examine them and make a decision as regards his/her trustworthiness. If they decide he/she is worthy of credit a customized loan proposal is drafted and written out using the ESIS form, the European Standardized Information Sheet, which is very useful to the applicant inasmuch as all Italian banks must, by law, formulate their offer on this same form. Consequently, prospective purchasers can conveniently and readily analyze the proposals they get from different banks and compare them.
Also, because Italian law provides prospective borrowers with a “reflection period” equal to a minimum of 7 days, applicants have all the time they need to carefully consider each offer’s conditions, and ponder the pros and cons before actually accepting.
What about the amount? Can a prospective borrower have any idea of what they will actually get from a mortgage in Italy? There is, alas, no general rule for this, nor is there a preestablished minimum-maximum, because each bank formulates an offer based both on the value of the property, and on the applicant’s reliability. However, potential borrowers who can count on the advice of local experts will be able to get a pretty close estimate: our long-standing experience, for instance, has taught us that the highest amount one can aspire to is approximately equal to 50% of the property price.
This said, we recommend prospective foreign buyers to familiarize themselves with the different kinds of mortgages available pursuant to Italian law. The Bank of Italy’s Guide to Mortgages provides an easy-to-use tool, and a perfect overview, in English, here.
As you can see on the website, there are 4 types of mortgages in Italy. These are:
- Fixed-rate mortgage - providing for an unvaried interest rate throughout the entire period.
- Variable-rate mortgage - providing for a rate that is revised at intervals based on the market.
- Hybrid-rate mortgage - providing for an interest rate that can be changed (from fixed to varied) in compliance with the conditions and time intervals.
- Split-rate mortgage - providing for two types of rates, one fixed and the other variable.
Selecting the mortgage to ask for, and so choosing the type of interest rate and payment terms, depends both on the prospective buyer’s financial situation and the market conditions. However, we do recommend that applicants submit their requests to different banks, and evaluate options available attentively: interest rates and installments proposed are bound to be very different, and the only way to get the best one is examining and comparing as many as possible. The TAEG, Tasso Effettivo Annuo Globale - Italian for APRC, i.e. Annual Percentage Rate of Charge, is a key element one should carefully consider. Representing the total cost of the mortgage over one year in terms of a percentage of the loan’s total amount, this figure comprises interest and a variety of other expenses such as taxes, processing etc.
Our services to help you get a mortgage to buy an Italian property
So, does a prospective foreign buyer have any chance of obtaining a mortgage from an Italian bank? Yes, of course, provided he/she can rely on professional local support for assistance with the paperwork, and insight on the Italian bank and real estate scenario.
Allow our team of experts to help and see you through the labyrinth of Italian bureaucracy, banks and legal system. Committed to the success of your Italian investment, our team of proficient lawyers and skilled advisors offers comprehensive services, and far-reaching guidance in all matters regarding property purchase in Italy, including, but definitely not limited to, all-round support for the obtaining of a mortgage.
Long-standing experience and in-depth knowledge of Italian legislations and rules allow us to provide full information, in perfect English, concerning a variety of available options and solutions available, and savvy advice on the best banks to contact. And, to further ease your load, we draft and collect all needed forms and paperwork.
Get in touch for more info about our real estate services in Italy