About Italian mortgages explains all you need to know about Italian mortgages.
An Italian mortgage is a medium to long term loan, typically with a 7 to 25 year term, secured on a property being purchased or possibly by a guarantee offered by a third party.
Italian mortgage loans are normally granted by retail banks, though for some specific projects a private bank or other financial lender may be more appropriate.
Because there are so many possible choices of Italian mortgage product the search for the best product can be made a lot quicker and simpler by using an Italian mortgage broker such as Best Italian Mortgage. For more information see our Italian Mortgage Products page.
Once the best mortgage product has been chosen, the mortgage lender will require you to work through an application process that is common to all Italian lenders.
Application
The first thing you need to know about Italian mortgages is that all lenders will require you to complete an application form in their preferred format.
The application forms may differ in style and layout as between lenders, but there will be a substantial overlap because all lenders are working to the common Italian regulatory standard.
Depending on the lender, an application form can be as short as 4 pages or possibly as long as 25 pages.
Document Collection
Once the application form has been completed the applicant will need to supply a range of supporting documentary evidence. This is because the Italian lenders don’t routinely use credit scoring from a credit agency but prefer the more personal approach of collecting relevant data about Italian mortgages directly from the mortgage applicants.
The required documents can be conveniently grouped together by theme as follows:
- Proof of Identity documents chosen from the standard A and B list proving who you are and where you live. For example, the US list and the UK list.
- Proof of Income documents to show all your sources of income.
- Proof of Financial Status documents which will certainly include bank and credit card statements for at least the preceding 3 months for every account you operate.
- Proof of Property including the preliminary property purchase agreement, a copy of the original property deeds, a copy of the cadastral plan showing the extent of the property and all relevant planning certificates.
- Proof of Assets will also be required to prove you have sufficient funds available to make the personal contribution needed fund the difference between the lender’s loan to value offer and the full purchase price along with property taxes and legal fees due on purchase.
This process will be much quicker and easier if you use a mortgage broker such as Best Italian Mortgage because we have considerable experience in collecting and assembling the mortgage dossier in a may that makes life easy for the mortgage lender.
Financial Analysis
A bank’s financial analyst will work through your application and supporting documents, now called “the dossier”, to check that you can afford the mortgage repayments, that you are financially sound and that you do not have a prejudicial entry on any regulatory and/or credit worthiness database.
If the financial analyst is happy with the financial analysis then they will call for a property survey and valuation along with a preliminary notarial report.
Property Survey and Valuation
The lender will instruct a surveyor it trusts to prepare a technical survey on the building and estimate the property’s fair open market value.
You should be aware that this valuation may be below the purchase price you have negotiated because the lender will invariably ask the surveyor to evaluate the maximum price the property might fetch to achieve a sale in 3 to 6 month if repossessed.
In Italy, the cost of the survey is normally charged to the borrower and it is due even if the borrower decides to withdraw their loan application and / or the bank decides not to offer a mortgage.
Preliminary Notarial Report
The final piece of information the bank will need is a preliminary notarial report prepared by a notary chosen by the customer, though some banks have a restricted list of notaries.
This report will contain:
- A formal description of the property.
- Details of the current registered owner as shown on the title deeds.
- Certification of the legal status of the property as shown on the Land Registry.
- The presence of encumbrances such as rights of way, sub leases and tenancies.
- Prejudicial registrations or transcriptions such as existing mortgages, foreclosures, seizures, and court orders etc.
Underwriting Decision
The financial analyst will review the mortgage dossier following the financial analysis, the result of the survey and valuation and the contents of the notarial preliminary report,.
If the financial analyst is happy with the dossier they will forward the application to the underwriting committee for authorization to approve the mortgage and issue a mortgage offer in the legally required form.
If the financial analyst is unhappy with the dossier and cannot resolve their concerns through supplementary information they will reject the mortgage application.
Formal Mortgage Offer
Under Italian consumer law, the mortgage offer is a legally binding document in the form of a public deed registered by a notary which must specify:
- The interested parties, the bank and the borrower(s).
- The existence of the compulsory insurance policy against fire and explosion.
- Net Sum disbursed by the bank
- Interest rate applied calculated using the TAN (Tasso Annuo Nominale) and TAEG (Tasso Annuo Effettivo Globale) methods.
- The interest rate margin above base rate, commonly referred to as the spread.
- Information about the property on which the mortgage will be secured.
- Amortization schedule for the loan.
- Choice of domicile, for any formal communication from the bank
Mortgage Registration
The notary is required to register the mortgage at the land registry (Conservatoria) at the point of purchase completion for the property.
Depending on the lender, the mortgage funds could be available on the same day as purchase completion or after the necessary period of time for the consolidation of the guarantee which is typically 15-20 days.
About Italian Mortgages Costs
The involved costs are:
- Investigation cost (around 1% of the loan amount)
- Italian substitutive tax (2% of the loan for a second house purchase, 0,25% for different purposes)
- Survey (approximately between €200 and €400)
- Insurance against fire and explosion, which will depend on the value of the property.
- Notarial charges, which will depend on the mortgage amount.