Qualifying for a Mortgage in Italy: Residents vs. Non-Residents
When you’re interested in buying a home or investment property in Italy, one of the first things you’re likely to consider is getting a mortgage. You may think to yourself: can I get a mortgage in Italy if I reside abroad? What are the terms? How easy is it? Truth be told, every individual situation is different, but let’s take a look at some common scenarios. Both residents and non-residents can obtain a mortgage in Italy, with some varying terms and conditions.
Mortgages for Non-Residents:
In order to obtain a mortgage in Italy as a non-resident, brokers will consider your type of income, the amount, and the currency of your main source of income. Typically, currencies in US Dollars, Euro, British Pounds, and Swiss Franks are preferred, followed by Canadian, Singapore, Hong Kong and Australian Dollars, along with Danish, Swedish and Norwegian Krone, and Japanese Yen. If you are from Central or South America but your main source of income is in US Dollars, you may still qualify for a mortgage in Italy.
What's the LTV & Interest Rate?
The typical Loan to Value Ratio for non-residents is 60%, meaning that the bank will finance 60% of the purchase price of your new home and your downpayment will be 40%. Closing fees are usually not included in the loan. The mortgage term is up to 25 years, and the interest rate is always fixed– currently they range between 2% to 3% depending on the LTV.
Mortgage Conditions:
The house must but be in habitable condition, with working bathrooms and kitchen, and overall good maintenance conditions. Unfortunately, banks are unlikely to finance major construction works for non-residents, like the structural overhaul necessary on a 1 euro home. They also must be classified as residential; Italian banks won’t grant mortgages for commercial real estate to non-residents. The minimum purchase price is €120,000 so mortgages will start at €72,000. If you would like to make small renovations or cosmetic updates to the kitchen, bathrooms or other areas, banks will generally grant you a home renovation loan paid in a lump sum at the end of the works, not to exceed 50% of the overall value of the property.
Besides having a secure source of income, and as a side note, employment income is preferable to income from self-employment, Italian banks will require you to have a strong net asset position in order to qualify. They will also expect you to have a low personal debt to income ratio. This DTI is generally in the region of 30% to 40%, so assume all of your combined expenses, including the new Italian mortgage repayments, existing mortgage payments in your home country and/ or rental payments, loans, and credit card payments, should be lower than 30% to 40% of your income.
Mortgages for Residents:
A frequent question our clients ask is whether they have to possess an Italian passport in order to qualify for a mortgage in Italy. Well, if you fiscally reside in Italy, meaning that you pay your taxes in Italy, you may qualify for a mortgage regardless of your nationality. Mortgage terms for Italian residents are among the best in Europe. According to a 2021 study reported in The Local, interest rates in Italy are the lowest recorded in Europe!
What's the LTV & Interest Rate?
The typical LTV ratio for Italian residents is between 70% and 90% with a 25-year duration and 2% to 3% fixed interest rate. If you are 35 years old or younger, banks could grant you a mortgage with a duration of up to 40 years and a 100% loan to value ratio up to €250,000 with an astonishingly low interest rate. Mortgage rates in Italy remain very competitive compared to the U.S. and other parts of the world.
For residents interested in home renovation projects, the government has renewed tax breaks and incentives amounting to 50% to 90% of the total renovation costs. Save on eco-friendly improvements and updates to the property’s facade, furniture, windows, terraces, and more. Plus, if the home is an apartment building with an HOA, you may qualify for a 110% super bonus! It’s never been a better time to buy a property and renovate in Italy.
Other Mortgage Options:
High Net Worth Individuals who need time to sell another property or move funds around, can apply for a short 5-year loan starting at 3 million Euro. This loan repayment for HNWI is interest-only, usually below 2% with a 30% downpayment. The loan can be easily refinanced at any time.
Mortgage Tip:
If you are planning to buy a property solely under your name but the bank requests your spouse or parent to co-sign the mortgage… wait! This mistake could cost you thousands of Euro. Your spouse would not be able to deduct interest on the mortgage on their personal income tax return and you would be able to deduct only 50% of interest. You want to avoid this scenario by all means, and there is actually a simple solution; your spouse or parent should be a guarantor (“fideiussore” in Italian) on the mortgage instead. In order to be able to fully deduct interests on the mortgage, the title owner of the property and the mortgage signee must match.
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