1. Turn to an experienced financial advisor.
Consider hiring a financial advisor who has experience with foreign clients and Italian banks. This can help you better understand the Italian banking system. He will know based on your needs, your project and your financial situation which mortgage and which financial institution to recommend. Italian banks all operate in the same way, but sometimes they have different ways of evaluating transactions and customers. The consultant can make a difference in this case. He will be the one to prepare all the mortgage paperwork in tune with the bank and according to the bank's guidelines. Doing everything on your own can be a discouraging and sure-fire experience.
2. Requirements needed to apply for a mortgage.
To apply for a mortgage in Italy you must meet certain requirements, most of which also apply to Italian citizens.
- Be at least 18 years of age.
- Permanent employment contract or pension. If self-employed, things can get complicated. The bank cares that you pay your installment consistently and that your job ensures a steady cash flow into your checking account!
- Demonstrable income
- Collateral (surety bond or insurance policy)
3. Assess your financial situation.
This is the most important stage, where everything is at stake. The bank carefully assesses your financial situation (considering you are a foreigner) to make sure you can sustain the monthly repayment installments. It considers your income, expenses and assets in your country. May sometimes seek help from companies in your home country to investigate your financial strength. Remember that banks do not want customers who are problematic or who may give problems in the future such as, for example, not paying their installments!
File evaluation time can vary from bank to bank. They range from 30 days up to 60 to 90 days. Do not expect a mortgage in 7 days, we are in Italy.... and this would be pure science fiction.
There is also a fact to consider. In recent years banks-and not only Italian banks-are cutting staff and closing branches, to make way for digital and the Web. So present employees are overworked and overloaded with paperwork to fill in between anti-money laundering, privacy, etc. ......so times are getting longer! Yay for digitization that is supposed to make our lives easier.
4. Documents needed for a mortgage.
Another important point: documents. To submit a mortgage application for a foreign client generally there is a list of documents that all banks ask for:
- Passport, obviously the first and one of the most important. For an initial assessment just a passport will do, later you will be asked for a social security number, family status, and certificate of residence;
- Employment contract. As I mentioned earlier, better a permanent contract (or pension slip) as an employee of private or public company. Freelance work is fine, but you may be asked for additional guarantees.
- Last three (3) pay stubs (pay stubs) or pension slips;
- Last two (2) tax returns;
- Bank statement with evidence of balance. What this means. The bank wants to verify that you have the portion of the price that remains with you once the mortgage is granted. Generally, Italian banks grant foreigners mortgages at 50 percent of the purchase price; you must prove that you have the remaining 50 percent in your country's bank account.
- Offer of purchase or preliminary (Proposta di acquisto o preliminare).
- Deed of origin of property purchase (Deed of origin of property)
- Cadastral map (Cadastral planimetry)
- Cadastral sheet (Cadastral view)
Important:
Subsequent to the first stage of feasibility analysis of the financing transaction, an Italian language translation of the income documentation with endorsem*nt by the Italian embassy, consulate or other authority indicated by the bank may be requested by the bank
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5. The preliminary contract of sale (Compromesso) and the mortgage suspension clause:
The preliminary contract of sale is a binding agreement between seller and buyer, in which the terms and conditions of the real estate sale and purchase are set out. The "compromise" guarantees to the seller and the buyer that the agreement reached will be respected, allowing the buyer to proceed with a mortgage application and the seller to be assured of the seriousness of the purchase intention.
One of the most interesting and important aspects of the preliminary contract is the suspensive clause for obtaining a mortgage. This clause makes it possible to "freeze" the effects of the preliminary, making the deed effective only upon the occurrence of a future and uncertain event, in this case the approval of the mortgage by a lending institution.
The presence of this clause is particularly important for the buyer and especially for foreigners, as it provides protection in case the mortgage is not granted. Without this clause, the buyer could find himself in a difficult situation, having to give up the purchase and losing the sums already paid
6. Understand Local Rules:
Every country has its own laws and regulations regarding mortgages, and Italy is no exception.
Italian regulations are sometimes much more restrictive than other European countries and the rest of the world.
So arm yourself with patience and try to get your trusted advisor to explain to you how mortgages work in Italy. Many things may seem strange or absurd to you, but they do and so if you want to buy with a mortgage.....you have to play along.
7. Insurance coverages.
In Italy, the only compulsory mortgage insurance is the fire and burglary policy. The purpose of this policy is to protect the property placed as collateral for the mortgage against damage caused by fire, bursting, lightning and explosions. The bank providing the loan requires that this policy be taken out, since the property is the collateral for its loan. In the event of a loss, in fact, the bank can claim the damage from the insurance company.
The fire and burst policy must be taken out for the full amount of the mortgage and for the entire term of the mortgage.
In addition to fire and burst insurance, there are optional coverages that it is good to evaluate and possibly include:
- Life insurance: this policy covers the risk of death of the mortgage holder. In the event of the borrower's death, the insurance will reimburse the bank for the remaining amount of the mortgage;
- Loss of Employment or Loss of Employment Insurance: This insurance coverage allows the borrower to protect his or her investment property, since in the absence of a source of income, the insurance company will provide payment of the mortgage payments. Usually this payment is guaranteed for a duration ranging from 6 to 18 months, the time it takes to find another job and return to being able to pay the mortgage payments.
- Disability insurance: this policy covers the risk of permanent and total disability of the mortgage holder. In case of disability, the insurance will reimburse the bank for the remaining amount of the mortgage.
- Home insurance policy: this policy covers the property against other risks besides fire and burglary, such as: Earthquake, Flood, Pipeline breakage, Theft, Water damage, etc.
These insurances are optional, but they can be a good choice to protect against unforeseen events. It is important to compare offers from different insurance companies before taking out a policy. It is also important to read the insurance contract carefully to understand the conditions and guarantees offered.
8. Banks do not do charity.
Remember that banks-all around the world-are private companies and not charities. They are corporations that must make profits and be accountable to shareholders. Therefore, they are not obligated to give you the mortgage. The bank makes its own evaluations, if it finds your operation profitable and worthwhile it will grant you the loan, otherwise it will refuse it.
9. You are in Italy and not in your own country.
Always remember that you are in Italy and dealing with Italian banks. Do not expect banks to behave as they do in your country and that we have the same way of operating. Listen carefully, observe carefully and read everything they give you.
10. Be patient and your dream will come true.
The mortgage application process can take time. Expect to have to provide additional documentation even several times or wait for a response from the bank.
Conclusion
Although the journey to obtaining a mortgage in Italy can be daunting, especially for foreign investors, understanding the process and being well prepared can make it a manageable and, why not....gratifying experience. Patience, thorough preparation and guidance from experienced advisors are key to giving you your Italian dream. Welcome to Italy!
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