In Italy there is not the same availability or flexibility as in the English market and foreigners may be disappointed with the limited choice of financial products. But lately, things are changing thanks to the English example, where there is a vast choice of mortgages. What happens if a person (who we will call Mr. Smith), who lives in the EEC, wishes to buy a house and take out a mortgage in Italy?
For those who live abroad
We need to prepare two separate scenarios: if Mr. Smith wants to remain a resident abroad and simply buy an Italian property, or if Mr. Smith lives and works in Italy. Let’s look at the case where Mr. Smith lives abroad and just wants to buy a property in Italy. This is the most complicated scenario because the bank needs plenty of guarantees during the preliminary stage, which is the part that follows the mortgage request. They will do a credit check “capacità di credito” on the applicant (to see if the client is declined or he has been declined in the past), a salary check “capacità di reddito” on the applicant (to see if the income is sufficient to repay the mortgage instalments), and a valuation of the property to be mortgaged. If the results show insufficient guarantee of repaying the loan, the bank will reject the application.
For those living in Italy
Luckily the situation is very different where Mr. Smith lives and works in Italy: in this case the foreigner is treated equally to an Italian citizen. Therefore, the traditional procedures of obtaining a mortgage are followed.
The legal requirements for obtaining finance are minimal.
It is sufficient to be:
- An Italian citizen resident in Italy
- A citizen of an EEC country
- A foreign citizen (non EEC) with Italian residence.
- Over 18years (a maximum age can be determined by the bank during processing).
In some cases the bank will skip the investigation stage. This happens when the applicant presents all the documents relating to their income, financial stability and the property.
- For people who are employed: declaration of income for the last year, last two months’ pay slips, indication of yearly salary and a declaration from the employer.
- For people who are self employed: declaration of earnings for the three last years, tax paid in the last year, certification relating to your business, relevant revenue and regular tax payments for the last three years.
- Documentation of your bills for the last three months and of any other property that can generate income.
- Preliminary sales agreement, land registry details including lease, contract of sale.
Also, you must obtain and present an Italian tax code card (easily obtainable from any town hall) and open a bank account (this will usually be opened by the bank that will provide the mortgage). As you can see the requirements are similar to the English procedures for requesting and obtaining a mortgage. As in England, the procedure has to be concluded in front of a notary. Usually an Italian notary, chosen by the bank, deals with the contracts, preliminary checks, liaison with the bank, the compilation and drafting of the deeds and all the procedures that follow (tax registration, transcripts and so on) and various registration taxes normally expected when you purchase a property.
- Lastly, we must mention the question of tax: the property must be declared from a tax point of view as it produces an income and consequently (apart from some exceptions) Mr. Smith will have to compile a tax declaration of his income for the Italian Inland Revenue.
The first step to obtaining a loan is letting the bank analyse whether you are in possession of all the requirements to qualify for a loan application. Which documents will be required, regarding your personal details and professional/financial situation depends on the bank you choose. After the necessary documents have been consigned, it takes from 15 to 40 days before the money actually becomes available.
During this phase, an expert from the bank will carry out an on the spot investigation/survey at the property. The loan must not exceed 80% of the estimated commercial value of the property. If the candidate-buyer is interested in purchasing building ground as approved by the Comune (the municipality), the loan will be allocated as the construction progresses. A loan can be requested for the purchase, building or renovation of the property.
There are fixed-rate loans, variable-rate loans or multi-option loans. With this last type of loan, the client’s initially preferred option can be changed every two years. Length of the loan: generally the banks offer mortgages that can be paid back over a period from 5years up to 30 years.
“Le rate” are the instalments that can be paid on a monthly, two-monthly or six- monthly basis. Instalments are composed of the capital sum (quota capitale) and the interest (quota interessi). The capital represents the part of the borrowed amount that needs to be paid back to the bank. The interest is the percentage charged for the lending service the bank is rendering. Loan Allocation The loan contract is signed in the presence of a public notary who will register the mortgage on the property in the appropriate register. The loan might be allocated at the time the final deed is carried out or, if the vendor is subject to debts, the money will be allocated at the time of the mortgage consolidation (11 days after the final deed).
- Fire insurance, in relation to the mortgage value
- Notary fee for loan-related services (not to be confused with the notary fee charged for final-deed-related services): depends on the mortgage registration percentage
- Substitution tax (imposta sostitutiva): 0.25% or 2 %
- Appraisal expenses: depending on the bank selected by the client
- Survey by an expert from the bank: depending on the bank selected by the client
- Bank-related expenses
The notary, surveyor (geometra) and appraisal costs must be paid immediately. The other expenses will be deducted from the amount of the allocated mortgage. The loan can be partially or totally extinguished by paying a penalty of 1 % of the remaining amount of the mortgage.