Mortgages in Italy
It’s often overlooked how easy it is to get a mortgage in Italy as a foreign buyer. Because not only is it possible, but the rates are excellent and the process straightforward.
Here we cover the different types of mortgages available in Italy, how to apply for one and share our top tips to getting the best mortgage.
Getting a mortgage in Italy
Italian mortgage lenders are generally considered conservative in their approach. There are strict criteria for non-resident applicants.
There is usually a minimum mortgage amount of €100,000.
Types of mortgages available in Italy
In Italy, you can get a fixed rate mortgage and a variable rate mortgage. You can even get an international mortgage, if necessary, although not all lenders offer this, so it’s worth doing your research.
Fixed rate mortgage
A fixed-rate mortgage is favoured by those seeking stability. They can rest assured that the agreed rate will not be influenced by moving interest rates. However, the drawback is that you could be paying a little more for that variable. If you choose to exit this agreement, there will be charges.
Variable rate mortgages
Variable rate mortgages move with interest rates. In Italy, the variable rate will fluctuate based on the Euribor.
Variable-rate mortgages can start with lower rates versus fixed-rate options but carry the risk of increasing over time should the reference index rise. For guidance on mortgage rates, speak to a mortgage broker.
Please note: There is no such thing as a “buy-to-let” mortgage in Italy as there are no restrictions on how you use your property in Italy, once you’ve bought it.
How much can you borrow?
Italian banks are cautious lenders and so will require a lot of evidence that you are a low-risk borrower. They will assess your actual ability to service a loan. So, in effect, they will look at your net income, after tax and all outgoings. Generally, around 35% of your net income will be viewed as covering your existing outgoings and servicing your Italian loan.
As a foreign buyer, you can typically borrow up to 60% of the property value with the following terms:
- Maximum debt-to-income ratio: 33%
- Minimum loan: Varies but usually €50,000 or €100,000
- Term: Maximum 25 years. Maximum 75-years-old at mortgage end.
As well as Italian banks, international banks such as HSBC offer mortgages for foreign residents looking to buy a property abroad.
The amount you can borrow is based on a debt-to-income ratio (DTI) rather than annual income multiple which is more common in the UK. There are a number of DTI calculator online that can help estimate the maximum amount you can borrow. There is usually a minimum mortgage amount of €100,000.
Mortgage eligibility criteria
You can apply for an Italian mortgage if you are employed, self-employed or retired.
Italian mortgage providers use a debt-to-income ratio (DTI) calculation. Your DTI ratio is the sum of all your monthly commitments (including existing rent or mortgage payments) and the repayments of your proposed mortgage, as a percentage of your net monthly income.
There was once a time when Italian banks would look more favourably at your application if you were already resident in Italy. However, that is no longer the case and it is just as easy to get a mortgage from your home in the UK, USA etc.
You will usually be required to open a bank account with the lender bank, from which mortgage repayments can then be made.
Essential documents
Alongside your application form, Italian mortgage lenders will require identification documents which include:
- Codice Fiscale li
- ID card or valid passport(s)
- Proof of income
- The initial sales agreement
- Credit report
- Proof of address (recent utility bill)
For employed applicants, your proof-of-income documents should include an employment contract, four months’ pay slips, your last two P60s (if from the UK) and the last six months’ bank statements.
If you are self-employed, you’ll need to show the last three years signed accounts, two years tax returns, an accountant’s declaration, and your last six month’s personal and business bank statements. Some of the documentation requested with your application may also need to be translated into Italian and certified.
The application process
The application process takes about eight to 10 weeks from submission in Italy. Pre-approval is recommended before committing, and you can usually get pre-approval in principle within days.
The process largely follows this format:
- Research and compare mortgage options with your broker
- Get a Codice Fiscale and gather your relevant documents
- Get a mortgage pre-approval for an idea of how much you can borrow
- Search for properties
- Commission a property valuation: your lender will need to know the value of the property before finalising
- Finalise the mortgage application
Getting your Codice Fiscale
Before you apply for a mortgage in Italy, you’ll need to obtain a Codice Fiscale. You can obtain one by applying through the Italian Revenue Agency. You will need to fill out an application form, provide identification documents and submit it online. Once approved, you’ll receive your Codice Fiscale number by email or post.
Alternatively, you can apply in person at your local Italian Revenue Agency office and fill out a form, if overseas, you can obtain a form from the Italian Embassy or Consulate or by requesting an appointment at the relevant office in Italy.
While it’s not a legal requirement to use a mortgage broker in Italy. However, as a foreign applicant, using a broker that specialises in Italian mortgages can better your chances. They will have access to more lenders than you, as an individual and can present you with an array of rates, which can save you a significant amount of time.
Additional considerations when applying for an Italian mortgage
Property checks
The mortgage provider will want to appoint a surveyor to inspect the property, and you will need to appoint a notary to perform a “Title Check” and issue a check report for the bank. The whole process usually takes from four to eight weeks.
Additional costs
Other costs involved are likely to include a bank’s arrangement fee (typically 1% of the loan amount), brokerage fees, the cost of a survey (around €250), mortgage registration tax (0.25% if main residence or 2% of the mortgage amount on a second home), notary fee, home insurance and interpreter fees.
Interest rates
Italian mortgage rates are dictated by the European Central Bank base rate, also known as Euribor. For foreign mortgage applicants, it can be hard to estimate rates as they vary significantly based on your circumstances, deposit amount and lender.
For a bit of insight, as of March 2023, the average rate for mortgages up to €125,000 was 4.47%. For mortgages up to €250,000 it was 4.09% and for amounts above €250,000, it’s 3.47%