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Mortgages for Expats in Italy

Author: Jim Newham
Submitted: April 2014

Italian lenders have a history of caution, which means that, for one thing, they were little affected by the credit crunch and Italian banks did not go under. Since then, lenders have become even more cautious. Together with the fact that the mortgage market is small and has been declining in recent years, this means that finding a lender in Italy who is prepared to finance you may prove difficult. A little shopping around is very likely to be necessary. Alternatively, you could consider obtaining a loan from a non-Italian bank. Of these, Barclays is the most common.

Remortgaging and property speculation are not present in Italy. Due to the lack of demand and competition, mortgage fees tend to be rather high. Mortgage interest rates average around 3.5% in Italy; this is low by international standards.

Requirements

In Italy, whether you will be granted a mortgage or not is linked to your ability to pay. This is most clearly demonstrated in the requirement for a certain debt to income ratio. The proposed mortgage plus any other debts you are liable for must be no greater than around a third of your total gross income. Rental income expected from prospected tenants is not included in this.

Terms

It may be possible to obtain a mortgage with a loan-to-value ratio (LTV) of up to 80% of the assessed property value. However, it is much more likely that you will obtain an LTV of around 60% especially if you are not going to be resident in the country. This means you will need to make a down payment of around 40%; you will also need to prove to the lender that you have sufficient funds to cover this amount.

Repayment periods from five to 30 years are available, though most periods are of 15 or 20 years. The maximum age at full term is usually 76. In addition, some lenders impose a minimum loan amount of €50,000.

Mortgage types

There are not as many mortgage products available in Italy as there are in some other countries (such as Anglo-Saxon ones.) Although both fixed rate and variable rate mortgages are available, with the latter accounting for around two-thirds of the market. Fixed rate mortgages are popular, however, because the rate is usually fixed for the entirety of the loan term and is only 1-2% above the initial variable rate. However, it should be noted that some options, such as self-certified mortgages, are not available; you must always prove your level of income is sufficient to cover repayments.

Application

Italy has a reputation for bureaucracy of dubious necessity, and you will certainly encounter this when applying for a mortgage. In addition to the mortgage application form, the host of documents you need to apply for a mortgage typically include:

  • passport (or ID card, if you have one)
  • marriage certificate and final divorce papers
  • proof of address
  • proof of purchase
    • copy of sales agreement
  • mortgage repayment schedule
  • proof of ownership of property
  • proof of income:
    • your last 3 payslips (balance sheets if self-employed)
    • your last 3 bank statements
    • your 2 most recent tax certificates (3 if unemployed)
    • employment contract

It may take a long time for the lender to give you an answer and for the entire mortgage process to go through; this is Italy and no-one likes to rush things. This makes it important to get a pre-approval of your mortgage before you make an offer on a property.

 

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