How Foreigners Can Get a Mortgage in Italy
Getting a mortgage in Italy is certainly no simple task, but with the right help and a healthy dose of persistence, it can certainly be done. As was discussed in the article on the current state of the Italian real estate market (INSERT LINK), home prices are at their lowest in well over a decade, and prices are poised to increase this year. Right now is the perfect time to invest in Italy, as you will find the value of your asset increasing continuously from this year going forward. So, without further ado, here is a quick guide on how to get a mortgage to finance that investment.
Know How Much You Can Borrow
Italian mortgages to foreigners depend to some degree on your personal financial situation and credit history, but by and large, lending institutions have become stricter since the financial crisis and usually provide no more than 50-60% LTV. Therefore, your downpayment should be approximately 40-50% LTV. 70% LTV loans are available, but they are a rarity for non-residents.
Know What Documents You Need To Have
To get a mortgage in Italy, you’ll need a number of documents that prove your identity, creditworthiness, and ability to pay back the loan to lending institutions. These include
- Passport or ID card
- Proof of address
- Mortgage repayment schedule
- Proof of purchase (the sale agreement),
- Property ownership proof (the deed to the home)
- Proof of Income (balance sheets if self-employed, last 3 pay-slips, last 2-3 tax certificates, employment contract)
Once you have provided these documents, the bank will review and verify their authenticity, a process which takes a few weeks. In the meantime, you should set up an Italian bank account, as you will almost certainly need one to take out the mortgage and make repayments.
Fees and Taxes
Taking out a mortgage in Italy is more expensive than in other nations, so there are a number of different costs associated with the process. These include the
- Bank arrangement fee: 0.4 – 0.7%
- Fee to surveyor: 200-400 EUR
- Mortgage Registration Tax: 2% for foreigners
- Cadastral Tax: 2%
- Registration Tax: 10% for non-residents, 4% for residents
- Property Tax: 0.5%
- Notary Expenses: approximately 2000 EUR
- VAT: 6-11%
Expect the total tax and fee transfer from receiving the mortgage and buying the property to be north of 20%, likely around 25% of the final cost of the property.
1) Personal creditworthiness check: review of personal financial information and property information to determine risk and creditworthiness
2) Mortgage application: preparation, submission and pre-approval of the requested mortgage
3) Property Inspection: a surveyor appointed by the bank inspects the property and issues a compliance report for the bank
4) Title check: a notary appointed by the mortgage applicant reviews the property title and issues a title check report for the bank
5) Final Mortgage Approval: Assuming you satisfy all previous requirements and inspections, the bank issues a formal mortgage approval
6) Funds release: After mortgage approval, bank and applicant agree on a signing date. In a mortgage loan asked for a property purchase, the mortgage applicant signs the purchase contract and the mortgage contract in front of the same notary within the same notary signing session and collects a banker’s draft (cashier check, certified check) to pay the vendor (seller). Funds are released at signing or after title transfer registration on the Public Land Register (Register of Deeds)
All told, this entire process takes about 8 – 10 weeks. To get started as soon as possible, contact Crossborder today, for help with every step in the process.