Can I Get A Mortgage In Italy?
If you are looking for a mortgage it’s best to start discussions with a bank or broker before you enter into a property sale contract (Proposta or Preliminare) so you can obtain some confidence about likely loan approval for your particular circumstances.
One question we are often asked is, can I obtain a mortgage in Italy, from an Italian bank?
Italian banks don’t usually provide pre-approved finance, however you don’t want to become committed to a property purchase and then find out later the bank will not support you. This is why you should engage with your bank or mortgage adviser or broker early in your property search.
You may be eligible for finance and so a bank or mortgage broker can assess your overall situation before you start negotiating, to give you guidance about likely bank support for your financial situation.
Banks don’t just favour local Italian buyers over foreign buyers, however during the financial crisis Italian lenders became more conservative in their lending practices and it became difficult for even an Italian citizen to obtain a mortgage without excellent working history and even a guarantee from Mamma and Papà to help them qualify.
Your eligibility for a mortgage in Italy will be driven by three (3) main factors;
- Current bank lending policy & European directives
- Meeting the bank’s loan serviceability requirements
- The property type and legal transferability of the property
If you want to find out if you are eligible for a mortgage in Italy do Contact us, and we will assess your situation.
Let’s look at each of these eligibility criteria, in turn.
(1) Current Bank policies & European directives.
Bank policy regarding loans for property can change. Italian lenders have become reluctant to deal with many foreign applicants as a result of the European Mortgage Directive, an EU policy that was created to protect European citizens living in countries whose local currency continues to depreciate against the euro.
The Directive required that borrowers earn their income in the currency of the loan. Since that moment, Italian banks assess foreign applicants on a case-by-case basis, and they prefer borrowers with incomes in the stronger world currencies.
Whether you are eligible to borrow will depend largely upon the currency of your income and type of employment, as well as the country of residency and your nationality.
Bank policies do change from time to time. You should contact us to ask about current bank policies especially for your own personal situation.
(2) Meeting the Italian bank’s loan serviceability requirements
One primary indicator of your loan affordability in the eyes of an Italian bank, is ensuring that your proposed Italian mortgage repayment, when added to any existing monthly mortgage payments and/or rent payments you might have, do not exceed 35% of your monthly net income after income taxes. If you meet this hurdle, you will be able to consider a mortgage.
Before formal approval can be granted the bank will want to see documentary evidence of your ongoing salary or business income, and all existing mortgage or loan repayments. This includes payslips from employment, and copies of annual tax returns you have lodged in the country in which you live. For business owners they will need to see company financial statements. Documents not in Italian or English will need to be translated before application for a mortgage.
It’s important to note that Italian banks will generally not consider existing or future rental income from any property when calculating affordability or considering available income to repay the mortgage.
(3) The property type and legal transferability of the property.
If you want to obtain an Italian mortgage the bank will need to approve the specific property you have found. In the same way the bank will check your income documents, they will also want to ensure the property documentation is in order. These checks can start immediately when you know the address of the property you want. Together with our mortgage broker partners we can identify early any concerns or legal barriers to buying the specific property you have found.
So it’s for this reason you ought to advise your bank or broker immediately when you have the address of a particular property you are considering, to allow them to conduct a preliminary property title search.
They can conclude if the bank would be prepared to potentially support a loan on the type of property you have chosen.
How much can you borrow?
For eligible borrowers, Italian banks will lend approximately 50% to 60% of the purchase value and they will generally not consider small mortgage amounts, for example less than 60-70,000 euros.
The amount you can borrow will be influenced by the purpose of the borrowing (buying or renovating) and the type and location of property – and of course the bank’s overall comfort level with your current cashflow as described above (the 35% rule).
Where do I start?
We can work together right from the start to determine if you are going to be eligible for a mortgage. Once you know you are eligible you can negotiate with greater confidence.
When your full loan application is lodged, together with the property documentation, the bank will perform it’s due diligence processes, and assuming all is in order the bank will then provide you with a Loan Offer.
The timing of the offer can be close to the required setttlement or closing, so you will need to carefully manage the time period from the start of property negotiations up until loan approval – protecting yourself with well-written contracts, where possible.
For further information don’t hesitate to contact us!