Italy Mortgage
Non-resident mortgage specialist since 2003
Key themes
Large loan amounts
For larger purchase sums (from about €1 to €1.5 million), there are banks that offer their services especially for this category of non-resident buyers. These are Private banks or special divisions of regular Italian retail banks. Therefore, in addition to the annuity mortgage, the interest-only mortgage is also offered under certain conditions. The financing setup will be designed to be fiscally optimal.
An installment-free mortgage can be offered for wealthy clients who are willing to have part of their assets managed by a private bank specializing in this. For example, it is possible to borrow 100% interest-free, provided that 50% of the loan amount is placed with the bank as “Assets Under Management.
An integral part of the services provided by the banks serving this category of customers is to minimize Italian taxes. To this end, they advise in consultation with you and Hypotheek & Buitenland on the design of the financing and its administrative set-up.
Financing without a bank
Alternatives to financing an Italian purchase project is to find one or more financiers outside of commercial banks. This could include friends or family or other wealthy “third parties” providing a loan. Crowdfunding (or peer-to-peer financing) platforms allow supply and demand to find each other for this type of financing. A specialized platform is being created for financing business plans and investment properties in Italy. Please leave your details via the contact form if you wish to be kept informed about the formal launch date; both as a prospective investor and applicants for funding are invited to leave their details.
If supplemental bank financing is required or if commercial banks do not offer a possibility then friends or family can step in with a loan or donation. Even then, it is possible to establish a mortgage guarantee with the Italian house as collateral.
Through a crowdfunding platform, financing can be arranged for entrepreneurs and real estate investors. Investors can thus diversify their investments and benefit from interesting returns. Are you looking for financing for your company or investment property in Italy or are you interested in investing in such projects with mortgage guarantee please leave your details via the contact form or by email. You will be informed of the formal launch of the platform specialized in this.
Funding rate
The maximum financing rate in Italy for non-resident buyers is currently 60% of the purchase price. Mortgage & Abroad works with a major Italian mortgage intermediary (the Italian “the hypothecary”) to realize the mortgages.
For non-residents of Italy, the maximum funding rate is 60%. The playing field of banks that can finance non-residents is limited, but there is certainly something to choose from.
For residents of Italy, up to 80% – 90% can be financed. For residents, there is a wide choice of banks; even banks that do not have a separate department for non-resident buyers can go there.
There are currently no Dutch banks financing foreign houses.
The lower the loan rate the lower the risk to the bank and the sooner a bank will usually be willing to grant a mortgage loan. Keep in mind that it is not true that the lower the loan amount the easier it becomes to get a mortgage. For loan amounts under €100,000, the banks are not hot.
If the equity comes into the purchase of another loan, that is a problem for some banks. People want to see their own money come from savings.
Non-residents refers to buyers who are not yet (tax) residents of Italy at the time of purchase.
Testing on income
Italian banks also test whether your income is sufficient to get a mortgage. Banks generally allow up to 35% of net income to be spent on all loan charges, rent and alimony if buying as a couple. If buying alone, the maximum percentage is 30%.
Italian banks require that salary income be derived from permanent employment. The Dutch phenomenon of the declaration of intent is not known in Italy.
It is possible to get a mortgage if the income comes from your own business. See further explanation on this under “UNDERTAKERS”
Italian banks look at net retirement income from a certain age. Exactly what age varies from bank to bank. Sometimes they then use a certain weighting percentage (“pondering”) of current income as future net retirement income, sometimes they look at the actual net pension to be received.
If the pension income has already started then Italian banks will test with that net pension income provided it is a pension guaranteed for the duration of the requested mortgage.
Italian banks do not include existing nor future rental income as income.
Italian banks do not include income from assets as income that is included in the assessment. It can only serve to provide additional support for the soundness of the mortgage application.
For households with gross annual incomes higher than €150,000, there are more mortgage options. See more on this at “BIG LOANS”
Existing spending patterns of their prospective customers are also tested by Italian banks. People like to see that there is a certain “savings capacity”; or in other words, that there is money left over to save each month.
In addition, more and more Italian banks are also testing the size of savings and how much savings remain after buying in Italy.
Italian banks do not include income from WAO or WIA as income. Income from private disability insurance is generally included as income.
Entrepreneurs
Even if the income comes from self-employment, it is possible to get a mortgage from an Italian bank. However, one is particularly reluctant to include profits not distributed to private parties that have remained in the company.
Italian banks are looking at earnings over the past three years. At least 3 years of annual figures must be available and the company must exist for at least 3 calendar years. In addition to profits, they will look at sales trends and the equity position on the balance sheet.
The own B.V. must exist for at least 3 years and must have a healthy profit and sales development. The balance sheet should also look healthy with positive equity and an acceptable current account ratio with the owner. Italian banks count as income the salary and actual dividends paid. Sometimes banks are willing to consider potential dividend income (profits left within the company) as well.
If there is a multi-company structure, it is important to clearly identify the results and ownership relationships.
Italian banks do not want to give a mortgage to a foreign company.
Application process
There is only one chance to make a first impression at a bank: as far as we are concerned, it should be overwhelmingly good. After choosing a particular route toward realizing the desired mortgage loan (see also “preparation”), the application process begins. Five stages can be distinguished in the application process: 1. preliminary application 2. file, 3. submit, 4. monitoring and adjusting, 5. conclusion.
To verify that an application is indeed – in principle – feasible, a preliminary application is often submitted first in consultation with our Italian partner.
A well-documented application is essential for a successful application. Unclear or gaps in documentation create the perception of additional risk on the part of the bank. Together, the documentation is completed to the point where all essential elements are substantiated.
Mortgage & Abroad creates a comprehensive cover letter explaining all the elements and translating them so that everything is 100% clear to the Italian bank. The application is completed with the bank’s application form after which it is submitted.
Once submitted, additional questions or requests for additional documents sometimes follow. Ambiguities are clarified and additional substantiation in the form of documents is provided. Where necessary, if the situation calls for it, the application will be adjusted. If an application is unexpectedly rejected then an attempt will be made to change the bank’s mind by convincing the bank they are wrong. Should that fail, consultation and, if possible, applying for a mortgage with another Italian bank will follow.
Once the bank’s credit committee has given an in-principle approval on the mortgage application, the appraisal will be launched. Our Italian partner directs the valuation.
When the risk committee of the respective bank has given its approval and also the appraisal shows a sufficient value, the bank will give its final approval and send the credit offer and all legally required documentation. These documents contain all the details of the mortgage being offered (the formal loan offer) and also list the risks, warnings and obligations associated with the mortgage (standard information document). After observing the legally required reflection period, the loan offer can be accepted and the mortgage can be formalized and the purchase completed at the notary. If desired, with the help of Mortgage & Abroad and the Italian partner, a bank account in Italy is opened and insurance is arranged.
The processing time for a mortgage application in Italy varies from bank to bank and from path to path. The bureaucracy and mountain of legal regulations in Italy is notorious which means that the processing time of a mortgage application can sometimes be several months. Counting from the time the fully documented mortgage application is submitted, with some banks you will know where you stand after a few weeks. With other banks, it takes as much as 3 to 4 months before there is a full agreement.
There are always (sworn) translations of Dutch documents involved when applying for a mortgage in Italy. The expected cost of this is €500 to €1,000. These include pay slips, tax assessments or other documents that need to be translated. The goal is always to minimize the translations required.
Mortgage Types
Italy has a different financing culture than the Netherlands. Italian banks take a more classical approach, focusing on paying off the mortgage. Consequently, the annuity mortgage is virtually the only form of mortgage offered. It is not common in Italy to sell all kinds of mandatory side products – such as life insurance – along with the mortgage. This is due to Italian legislation protecting consumers.
The annuity mortgage is the most widely used form of mortgage in Italy. In the absence of mortgage interest deductions and a less sound retirement system, the focus in Italy is on paying off the loan through this form of mortgage.
Redemption-free is not currently offered in Italy to non-resident customers. Only for a certain profile of customers with high income and assets are there options for a grace loan. This is offered by some private banks who do so on the condition that a certain portion of private wealth will be invested under their management.
Most Italian banks do not get excited about loan amounts below €100,000; in fact, they are not commercially interesting enough. In fact, most banks have a hard lower limit of €100,000. In practice, this means that it is more difficult to finance a house if the purchase price is less than €170,000.
Italian banks usually offer either a fixed interest rate for the entire term or a variable interest rate.
The interest rate offered in Italy to the non-resident customers is similar to the Dutch mortgage rate and thus it is a competitive rate.
Italian finance culture is focused on paying off a mortgage quickly. Therefore, maturities of 30 years are not common. For non-resident buyers, terms of 20 years are common and sometimes a maximum term of 15 years is used. See more information on maturities under “Age and maturity”
Assistance in obtaining a mortgage from an Italian bank is indispensable. The process is so bureaucratic and involves so much Italian legislation that applying for a mortgage without professional guidance is virtually impossible. There is a cost associated with this counseling. Consider total costs totaling about 2% to 3% of the loan amount.
Purchasing death benefit insurance is usually highly recommended. Due to legal restrictions on this, it is not possible for Italy to take out mortality insurance together with a mortgage. However, it is possible to take it out separately. This could possibly be done in the Netherlands.
When repaying a mortgage loan early, it is no longer permitted in Italy to charge a penalty unless the mortgage existed before Feb. 2, 2007. In fact, this is the date of the coming into force of the “Bersani Law,” which prohibits the charging of a fine.
A bridge loan is possible if the house being bridged on is also in Italy. Bridging on a house located in the Netherlands or a country other than Italy is not possible.
The release of surplus value through a mortgage is not possible in Italy unless the amount to be released is going to be used to purchase another property. Releasing money for consumption purposes or to supplement retirement is therefore not possible.
It is still possible with some Italian banks to apply for a so-called post-financing for up to 6 to 9 months after the purchase. In other words, recover the funds advanced for the purchase through a mortgage.
Duration and Age
Regarding the age aspect, the financing culture in Italy is different from that in the Netherlands. The maximum age at which a mortgage must be terminated is at age 75. This aspect has an impact on the maximum term and thus the feasibility of a mortgage application.
For non-resident buyers, terms of 25 years are possible. In practice, banks will usually offer non-resident buyers maturities of up to 20 years.
The age at which a mortgage is applied for has an impact on the maximum amount that can be borrowed. This is because the maximum amount to borrow is lower when the monthly payments are higher. And monthly payments are higher with an annuity mortgage when the term is shorter.
Italy buying process
When you have found the house you want to buy then the whole process of buying in Italy starts. Below are the different steps of the process
Once the house is found then the first step is to agree on the price. Keep in mind that there are quite a few cowboy-type types active as real estate agents who are very adept at pressuring a buyer to just agree to a purchase price and a proposta di acquisto (offer to purchase) to sign and make a down payment. Beware of this. It is important to first perform some checks regarding the object to be purchased. And realize that signing this document is not optional. Indeed, the obligation then arises to enter into a contratto preliminare di vendita (preliminary contract of sale). It is advisable to hire legal counsel at this stage.
Start the application process well in advance. You may already be able to cut corners by submitting the application as soon as possible. See “APPLICATION PROCESS.
In doubt about the structural condition of the house? Then have a building inspection performed. Contact Mortgage & Abroad for advice on this.
The buyer chooses a notary, partly because he also has to pay the notary. The cost of his services is about 1%. See also: GOOD “PREPARATION”
An Italian notary is impartial and has the role of controlling a multitude of elements, however, it is nevertheless recommended that you get legal assistance if you have no experience buying in Italy. There are a number of specialized legal agencies operating that Mortgage & Abroad can put you in touch with.
We can assist you in arranging a notarized power of attorney to complete the purchase from the Netherlands. We have contacts with a Dutch notary where the process of making the power of attorney can be arranged “remotely” (via zoom/teams).
The initiation of a contratto preliminare di vendita (purchase agreement) is usually done by the Italian notary. Get advice on the content from your legal advisor.
The condition precedent for financing is not popular among Italian sellers, but it can be included in the proposta di acquisto (offer to buy) and in the contratto preliminare di vendita (Italian contract of sale). Contact Mortgage & Abroad to discuss how to set up a sale without the risk of losing the down payment.
The outcome of the mortgage application process is the receipt of the unconditional loan offer. After accepting the loan offer, the bank is ready to release the mortgage funds.
When the sale is imminent, your home should be insured for fire (and theft). Hypotheek & Buitenland has contacts with parties who can provide competitive quotations for this purpose.
Having an Italian bank account is indispensable when you own a home in Italy. Part of the mortgage application process also includes opening an Italian bank account. For this, an appointment is made with the mortgage lending bank to open a bank account locally.
The actual purchase must be ratified by an Italian notary. He will legalize the bill of sale(Atto) with his signature and formal stamp. Then the title deed can be registered in the Italian land registry, after which the buyer has officially become the owner. Through the notary, a notarized power of attorney can also be drawn up after which the remote purchase can be made
How long the buying process takes depends on what delaying elements are involved. Some trajectories last 2½ months some as long as 6 months.
New and remodeling
Mortgage & Abroad can currently serve you with a mortgage for new construction only when the home is already completely finished. Thus, a mortgage where funds are released incrementally as the works progress is not currently offered through our mediation. It is possible through our mediation, however, to apply for a mortgage for renovations/conversions to your Italian home.
The maximum financing rate for new construction is applied to the sum of the land purchase and total construction cost.
For renovations, the maximum financing rate is applied to the sum of all renovations for which quotes are available from official Italian contractors.
The process of getting financing for new construction done requires intensive guidance and is time-consuming. Hypotheek & Buitenland also accompanies these routes, but at a higher rate for the service compared to financing existing construction.
To apply for a mortgage for renovations when working with a Dutch contractor, “a guy” or self-build, Italian banks do not finance. Only when working with official Italian contractors can renovations be financed with a mortgage.
Release of mortgage funds in a remodeling mortgage are made from construction deposits at the client’s call as work progresses and invoices flow in. Often, an interim appraisal then also takes place, checking whether the works have actually been carried out. The condition for release of the mortgage funds is that a mortgage security has been placed on the house by mortgage deed.
Rental
Seasonal rental of an Italian vacation home is quite common and mortgage lending Italian banks are fine with it. Only when a property is overwhelmingly going to be the source of the (only) income in the future do people not want to finance it regularly. Rental income is taxed in Italy and not in the Netherlands. A tax return on this income must therefore be filed in Italy.
Italian banks have no problem with seasonal rental of a house bought with a mortgage based on existing income. What is important is that the property is not too commercial in nature. So existing Agritourisms, Bed & Breakfasts, hotels, or properties with multiple outbuildings to rent out or lots of rooms (with separate bathrooms) may lead the bank to conclude that there are plans other than purely private use and occasional seasonal rentals. When banks suspect that prospective clients have plans to “change course” and start or take over a tourism business in Italy, they conclude that the existing income will end and that the requested mortgage is in fact business financing is.
The tax treaty between the Netherlands and Italy provides that Italy may levy taxes on assets in the form of real estate located in Italy such as a second residence. As a result, the (net) value of an Italian house is taxed in Italy and no longer in the Netherlands (box 3). Rental income is taxed in Italy and thus a tax return should be filed in Italy on this.
Renting out an Italian home partially financed by a mortgage can be an interesting addition to retirement. When rental income covers the mortgage and other expenses then the house “comes to you” because after full mortgage repayment there remains a mortgage-free home that generates rental income.
There are several rental platforms for second homes. These platforms offer services of varying degrees. From rental mediation only (via a booking module) to complete outsourcing of the rental including local handling.
Acceptance of collateral
Italian banks are critical of the type of property to be financed. Houses that are not habitable or are located very remote are considered insufficiently current and are often not financeable through a bank.
Italian banks do not want to finance all houses. Only those houses that are sufficiently current in their eyes, i.e. houses that – should the (financial) need arise – can be sold again somewhat smoothly, are they willing to finance.
A bank will ask for multiple cadastral extracts about the collateral to be financed, to verify a multitude of data about the collateral. The core of this investigation is to verify that what has been built is legal.
Houses that are in such poor condition that they are not habitable will not want to be financed by a bank. Core elements of this are that, at a minimum, a house should have running water, a somewhat up-to-date electricity supply, heating, a sewer connection or functioning septic tank, a kitchen and a bathroom.
Very remote situated houses – far from a village or town – and far from “civilization” are more difficult to finance than houses that are more “in civilization. There are also certain obsolete regions where banks are more reluctant to finance than in regions with booming housing markets.
Special properties such as castles or wine estates are more difficult to finance. There is a (very) small market for this type of special property and sales can take years. Houses that are very A-typical for the region can also be a problem, as can houses with a lot of land (tens of hectares). Indeed, banks are wondering if such a “non-resident buyer” is going to manage to maintain all that land.
Contributing a very large portion of your own money to a purchase increases the chances of winning over the bank to finance. But for many objects, that is often not enough either. At issue here is the fact that the system of reclaiming collateral by auctioning it – as the ultimate consequence of no longer (being able to) meet monthly mortgage obligations – does not work well in Italy in all regions. After all, sometimes a house also fails to sell at auction for a sufficient amount.
Houses or properties where it is abundantly clear to a bank that they will be operated as commercial properties in the future (for example, in the tourism sector) are not financed as second homes based on existing income.
Funding business plans
Mortgage & Abroad does not currently accompany applications for business financing in Italy. Thus, we cannot help with mortgage applications for starting or taking over a property in the tourism sector, where it is clear that the existing income in the Netherlands will be lost. The services of Mortgage & Abroad are currently limited to mortgage advice and mediation for the purchase of a second or vacation home. For advice on business financing, see the section FINANCE WITHOUT BANK
Do you have plans to start / take over an Agriturismo, Bed & Breakfast , operate gîtes, buy or start a (mini) campground or hotel where the property to be bought in Italy is central and where the future income stream resulting from the business activities is required to meet the monthly mortgage payments, then that no longer falls under applying for a regular mortgage based on existing income. That’s when enterprise financing is involved. If you want to qualify, then – as in the Netherlands – a business loan will have to be applied for at a local bank where the business plan – and thus the future expected income stream – is the basis.
Hypotheek & Buitenland cannot guide you through this type of process and cannot assist you in applying for business loans with Italian banks. Our services are limited exclusively to advising and mediating the acquisition of mortgage credit where an existing and steady income forms the basis for the purchase of a second or vacation home.
An increasingly common route for funding business plans is to find a loan through a crowdfunding platform. For advice on this type of business financing, see the section FINANCING WITHOUT BANK
In some exceptional cases, it is possible for a property in Italy – where the plan is to do business there in the future – to be purchased initially as a second home. This is possible only if a bank is convinced that there are no plans to move to Italy in the near future and build a new life (with a new source of income) there.
Purchase and ongoing costs
The “buyer’s fees” (also known as “notary fees”) generally include the total costs due in taxes and notary fees. These costs are twofold: one part the costs related to the purchase of the property and the second part related to the notarization of the mortgage. The transfer tax for a second home is 9% of the cadastral value of house. Total notary fees are usually about 1% of the cadastral value with a maximum of €3,500.
Transfer tax is payable when buying existing construction. For vacation homes the transfer tax is 9% for main residences it is 3%. This percentage is applied to the cadastral value, which is usually much lower than the purchase price. On top of that, notary fees are due and charges for Geometra‘s services. VAT(IVA) is payable on their fees.
It is highly advisable to hire legal counsel to assist you during the buying process. Good legal counsel more than recoups their fees. We can put you in touch with a good Dutch-speaking legal advisor.
In Italy, brokerage commissions of 3% of the sale are common with a minimum of €6,000.
In addition to the cost of the buyer, there are often other costs involved such as costs for an architectural inspection, the appraisal, translations, legal, tax and financial advice.
Once you own the house, you will owe annual local taxes(imposta municipal unica, IMU). The basis for taxes is the cadastral value+5%. On this – depending on a number of factors and location of the property – an annual tax is levied from 0.40% to 0.76%.
The gain on sale tax is a tax meant to discourage property speculation and is due when you sell the house at a profit. Will the Italian home be sold at a profit within 5 years? Then 20% income tax is due on the sale profit.
On equity put into an Italian house, it is agreed in the tax treaty between the Netherlands and Italy that Italy may in principle levy taxes on that. Specifically, the house does have to be declared in the Netherlands in the tax return, but a “double taxation avoidance” is applied that makes the net value of the house not included in the box 3 calculation. Italy has no wealth tax like the Dutch box 3 levy. Rental income is taxed progressively within Italian income tax (23% – 43%), a lump-sum deduction is deductible as an expense (up to a maximum of 30% of rental income).
You can find detailed information on Italian tax rules in English on the website of the Italian tax authorities: https://www.agenziaentrate.gov.it/portale/web/english/nse/individuals
Good preparation
Being well-prepared is often half the battle and, once you get deeper into the buying process, it prevents stress and panic attacks. In short, to be well prepared is to buy carefully and in a controlled manner. We can assist you in the preparation process. We have an extensive network of specialists in the industry.
Is buying and owning a home in Italy really for you? And how do you address it? There are legions of books available on this subject. We are happy to give you tips.
If you are going to buy a house in Italy then some knowledge of the Italian language is indispensable. It starts with language, even in Italy.
You cannot buy a house in Italy without having an Italian tax number; the Codice fiscale. Contact Mortgage & Abroad about how to request this number or visit: https://www.agenziaentrate.gov.it/portale/web/english/nse/individuals/tax-identification-number-for-foreign-citizens
If you do not know what you have to spend then you cannot search for a house. Get advice on this; based on available equity and your borrowing capacity, the buying budget can be determined. Contact us for a free exploratory “quick scan” and possibly a preliminary application to an Italian bank.
Good planning gives overview and thus control of your project. Create a timeline showing approximately how much time you will spend on each stage of the buying process.
Avoid dwelling too much on multiple thoughts (regions). Focus on a particular Italian region and thus avoid that too broad an orientation will take you too much time and it will only be searching and your plan will never become concrete.
To be prepared for applying for a mortgage later, it is very wise to prepare for it at this stage. In fact, a lot of documents will be requested regarding your identity, income, expenses and future collateral.
If you have never bought a house in Italy before, it is unwise to want to handle the purchase without outside help. You will find that it is impractical to have to reinvent the wheel on every subject. Moreover, a good advisor makes his money back. Map out which advisors you can approach. In doing so, it is particularly important that you timely approach a legal advisor who will be unlined to assist you on your purchase.
The role of the notary in Italy is somewhat similar to the role of the notary in the Netherlands. An Italian notary also checks and examines whether what is stated in a purchase agreement is correct. This includes the property’s registrations, the status in terms of any mortgage collateral that is on the property.
We can help you prepare a notarized power ofattorney for the completion of the purchase from the Netherlands (without the need to travel to Italy to sign personally with the notary). We have contacts with a Dutch notary where the process of making the power of attorney and apostille can be arranged remotely (via zoom/teams).
Especially with somewhat larger purchase amounts, it is wise to think about “estate planning” in advance; in other words, avoiding paying (too much) inheritance and inheritance tax in the future. In Italy, paying double inheritance tax on the property (both in the Netherlands and Italy) is real! Get advice on this.
Mortgage transfer
We do not currently broker the refinance/refinancing of an existing mortgage on an Italian home.