Getting a mortgage to buy a home in Italy, tangled jungle or path with no obstacles?

The answer to this recurring question depends on many variables, but today, more than ever, there are many chances of getting a mortgage in Italy.

Here are 5+1 things to know according to Armando Bechi, Italian Mortgage Consultant.

1) How long does it take for a loan to be approved?

The loan approval procedure for an international investor is no longer than that for an Italian buyer.

If it is longer, try with another bank/advisor or else you will waste your time and will not get the result you are looking for.

So try to understand in advance whether the advisor who is helping you, or the bank you have approached, actually has the necessary skills and previous experience to be able to verify foreign documentation and to understand the differences in the client’s tax and income structure since they may vary greatly compared to Italy.

Always consider that banks have their own policies and more often than not, they don’t want to immediately give up on a good application and a good client. So they may tell you that it can be done and that they see no obstacles but they do not actually know the frequent limitations on this type of request that the central credit offices of their own banks have.

As a result, in the end you will not have your application approved.

2) What is the maximum amount that can be obtained?

Today, for requests from foreign customers, there are limitations relating mainly to the percentage of intervention (LTV, Loan To Value), which cannot be more than 60% of the purchase price or rather of the lower value between the purchase price and the value given by the bank appraisal. In several cases this LTV may even be as low as 50%.

→ This parameter is not negotiable, so if you do not have at least 50% of the deposit don’t consider it.

→ If you are offered an LTV of more than 50-60%, you are wasting your time.

3) Are there any additional costs to consider?

When applying for a mortgage you should always consider the additional costs.

The additional costs of buying a property usually start from about 10% of the purchase price and may vary from case to case.  

The ancillary costs of the loan are the following:

  • mortgage fee (spesa istruttoria) which can be a € 800 flat amount or a percentage of  the mortgage amount (about 0,40-0,60%)
  • mortgage tax which is 2% of the mortgage amount
  • the appraisal fee (perizia) which may vary from €250 to €1.000
  • the insurance which is compulsory and must be calculated on the reconstruction value of the property. 

These values may vary depending on the banking channel you chose so they are purely indicative.

4) Do I have to go to the bank in person to take out a mortgage?

Be prepared to schedule at least a personal meeting at the bank. In almost all circumstances, it will be necessary to go and sign the mortgage application and all the other bank documents on privacy, anti-money laundering, etc.

This meeting can only take place after a purchase proposal has already been signed and accepted by the seller.

Of course, in the case of a good relationship with the lenders, there might be the possibility of obtaining a pre-approval based on one’s economic-financial profile and a plausible example of the property you will purchase.

Timing always depends on the bank you choose. An average timeframe to conclude the whole process, i.e. to go to the deed and buy the house with the mortgage money, is about 6-8 weeks.

However, there may be obstacles during the process (e.g. related to the appraisal of the house) that could take more time.

In this, the bank plays a key role because it will perform all the checks on the property. So the buyer will be sure that the property he/she is buying is 100% legal and with no problems.

This cannot be taken for granted when buying without a mortgage, since in this case it is based only on what sellers say in front of the notary (who is not obliged to inspect the house in person).

5) What are the requirements you need to apply for a mortgage?

To apply for a mortgage, these are the main things that the bank wants to know from you:

– The currency of your income and your residency for tax purposes. It is difficult, though not impossible, to get a loan if you earn in a currency considered to be outside the international market.

– The Italian region where the property that you will buy is located and its conditions at the time of the mortgage application. Usually banks grant mortgages only in case of already habitable or renovated properties.  

Since there are no fixed guidelines for everyone, the best advice is to submit your requests in the most detailed possible way.

– The client’s economic profile. Usually banks evaluate more positively an employee with a good employment history. A recent change of your employment situation is not always the best position to be in as well as being a temporary worker. You will not be able to obtain a mortgage.

The self-employed position is still evaluated (but not by all banks) but should be supported with more documentation.

A very frequent phenomenon in this period

Many foreign clients decide to permanently move their physical and tax residency to Italy.

Banks do not accept it if this is a “change of life”, a concept that is very popular nowadays amongst many clients especially from Central and Northern European regions. 

The only possible situations in which banks can accept and support your move to Italy are those in which you maintain your job in your home country and work remotely. 

New activities such as those based on new businesses related to agritourisms or accommodation facilities cannot be the only source of income if you want to obtain a mortgage since they are considered to be risky businesses.

There are so many cases we can’t write about them all here, but keep on planning to buy your home in Italy. You can do it with a good dose of tenacity and assistance. Happy house hunting!