Getting a mortgage on your property can be challenging as you need to go through a certain procedure before the bank approves your request.
Who can apply for a mortgage in Italy?
In theory you can apply for an Italian mortgage regardless of your citizenship. Whether you are EU or non-EU citizen you can apply for a mortgage on your property (as long as it is located in Italy).
Applying as a non-Italian resident proves extremely complicated, as the source of funds is harder to prove and banks are less willing to operate with non-residents.
Non-EU residents of Italy can apply for a mortgage if the payback period does not exceed the VISA expiry date, which in turn results in the need to have a Permesso di Soggiorno di lungo periodo with no expiration.
Being a resident of Italy is not sufficient to be approved for a mortgage. The mortgage request requires that the property has a cadastral conformity with the floorplans filed at the Comune and at the cadastre; any non-conformity must be removed or adjourned.
The notary cannot transfer the property if the floorplan and the building itself match 100%.
Furthermore, you must prove to have sufficient income sources to afford the instalment plan. The rule of thumb is that the annual payments cannot exceed 30% of the applicant’s gross income. If you make € 50,000 you can pay up to € 15,000 in instalments per year (€ 1.250 per month).
In addition, the maximum length is also regulated. In fact, many bank institutions do not provide a mortgage if the applicant’s age at the final payment is 80 years or more; in some cases, the payback period can be reduced to match such limitations. In any case, this may vary depending on each bank.
Finally, financial institutions might request a minimum residency period of 2 years prior to applying for a loan.
Third party checks
The bank needs to assess the value of the property for mortgage purposes. There is a requirement set by the law that the bank cannot loan more than 80% of the property value appraised by a third party surveyor (Geometra).
The surveyor also appraises the cadastral conformity of the asset.
In addition, the notary appointed by the borrower checks the property title of the selling party, and if there are any third party claims (i.e. donations, sales, other mortgages) prior delivering a report to the bank.
The bank will also run a solvency check on your persona. If you defaulted on credit payments in the past, your CRIF report shows it; note that it takes 24 months to clear the bad credit history in Italy.
Once all the above steps have been undertaken, your mortgage request can be finally approved.
Lombard credit option
Why not consider a Lombard credit option? In this case, you can secure a loan backing your investment portfolio (in some cases your pension fund).
In the Lombard credit you transfer your funds to an asset manager and pledge the funds (or part of it) to a financial institution, which in turn will release the money, and you pay it back over the payback period as agreed with the bank.
This option is normally cheaper as the assets can be liquidated more easily than a mortgage, however the margin call risk is higher as the underlying assets value fluctuates more.