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 Pappa to help them qualify. The banks are only just emerging from the crisis period today.
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.
Bank policy regarding loans for property can change. At the time of this article, Italian lenders had become reluctant to deal with foreign applicants as a result of the European Mortgage Directive, which was designed to protect European citizens living in countries with much lower-value local currencies (versus the Euro).
Italian banks assess foreign applicants on a case-by-case basis, and they prefer borrowers with incomes in the stronger world currencies (eg GBP, USD, Euro, CHF).
Bank policies do change from time to time. You should contact us to ask about current bank policies especially for your own personal situation.
The primary indicator of your loan affordability in the eyes of an Italian bank, is ensuring that your proposed mortgage repayments, when added to existing monthly mortgage payments you might have, do not exceed 35% of your monthly net income after income taxes. If you meet this hurdle, you are more likely to be approved.
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.
Note that Italian banks typically will not consider future rental income from the property as available income to pay mortgage repayments or to approve your loan application.
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.
Typically Italian banks will lend approximately 50% to 60% of the purchase value (and rarely up to 75% for high-net-worth borrowers) once they approve your eligibility for a loan.
We can work together right from the start to determine if you are going to be eligible for a mortgage. This will depend largely upon the currency of your income and the amount of your income compared to your regular expenses including existing mortgage and loan payments and the proposed new mortgage repayments, as described above.
The amount you can borrow will be directly influenced by the purpose of the borrowing (buying or renovating and type and location of property) and the bank’s overall comfort level with your current cashflow as described above, and this will lead to a Loan Offer for a specific amount for your property purchase.
For further information don’t hesitate to contact us!