First steps in the Italian property market
Buying or selling a property (a home, office, shop, studio, land etc.) is one of the most significant moments in the life of a person, whether it is an investment or, especially, if the property is intended as the family home. If you are planning to buy a summer home for the holidays, this article will provide all necessary information about how to take out a mortgage in Italy.
The Italian property market provides plenty of great options for both local and foreign home buyers ranging from gorgeous homes in famous cities and seaside resorts to enchanting countryside locations yet to be discovered by foreigners. Although properties for sale in Italy are a bit costlier in popular locations such as Tuscany and Umbria as well as in major cities including Rome, Florence, Milan, and Venice, there are other emerging markets such as Puglia, Calabria, Sardinia, and Abruzzo with considerably cheaper prices.
Once you have identified your dream holiday home, viewed it, and decided it is the one for you, it will be imperative to first understand the legal process of buying property and taking out mortgage in Italy before you finally close the deal.
A mortgage loan is the typical financing contract within Italian legal system and almost always one of the parties is a bank. To obtain a home loan it is sufficient to approach a bank and provide the documentation it requests.
Despite of getting a mortgage in a foreign country in order to buy a property may be economically simple and convenient, however it could be technically and legally very difficult. Furthermore, unless the buyer is fluent in Italian, it is advisable that the person concerned gives power of attorney to an Italian lawyer, as loan contracts and loan agreements will be written in Italian (even if the notarised public deed can be translated by a interpreter, thus the parties will be able to check that the notary has correctly represented their intentions in the public document before signing it).
The process of purchasing property in Italy explained
The list below explains the main steps you will go through when taking out a mortgage in Italy:
- Firstly, before you proceed with anything, you will have to get a "codice fiscale". If you are thinking to purchase a property in Italy, in fact as well as to open an Italian bank account or any other type of investments, contracts or legal proceedings, you will need it.
- Secondly, in the event of a purchase, it is essential to open an Italian bank account, "conto corrente", not only to transfer there the funds for the completion (as the final payment normally happens in Italian bankers drafts) but also to get the various utilities paid automatically.
- After that, your solvency, or repayment capacity, will be verified: it is a review of your personal economic and financial information, especially the relationship between income and mortgage payment (which should not be more than 1/3 ratio, in order to keep it supportable in the long term for the mortgager) and the value of the property. This check is required in order to successfully take out a mortgage.
- Apply informally for a mortgage: prepare documentation, submit it and wait for pre-approval;
- Verify the property's compliance to regulations: a surveyor of confidence appointed by the bank will inspect and then evaluate the property and issue a compliance/value assessment report and also check possibly irregularities and urbanisation abuses. This step is very important because after that, the bank will be aware about the real economic value of the property as it can provide mortgage up to 80% (rarely banks provide mortgage up to 100%, but they want more guarantees, such as surety) of the average market value;
- Verify the property's legal status: a notary appointed by the mortgager reviews the property's legal status and issues a report for the bank;
- Get a formal mortgage approval: once overcame solvency, compliance and legal status verifications, the bank issues a formal mortgage approval;
- Disbursement of the funds: after the formal mortgage approval, the bank and the mortgager agree to sign a contract in front of the notary. In case of property purchase mortgage, the mortgager signs the purchase contract and the mortgage contract in front of the same notary within the same notary signing session and collects a banker's check (cashier check, certified check) to pay the vendor (seller). Funds are released at signing or after title transfer registration on the Public Land Register.
How do I rent my house in Italy?
Once you will be the owner of the house, obviously you can decide to rent it while you are not visiting it. The Italian law system has a type of touristic contract called "contratto di locazione ad uso turistico" that is a short-term rental contract. The owner of the house can get benefits from this kind of agreement due to the low taxation and the easy way to rent the house (no registration needed for this contract and payments up to 2900 euro can be done with cash). Anyway, those who are going to rent the holiday home from abroad, should be aware about the "double taxation" threat and should understand how the laws work in their respective countries: fortunately there is a convention between the United Kingdom and Northern Ireland and the Italian republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
Why do you need an Italian lawyer?
The only way to overcome these "barriers" is to contact and give power of attorney to an Italian specialised lawyer and try to take out a mortgage in a top-ranking bank (such as Barclay's or Unicredit) which is physically present on both territories, England and Italy, inasmuch probably the English head office and the Italian branches (or vice versa) could work and collaborate clearer and easier to provide the mortgage for a non-resident costumer.
At Giambrone, our Italian real estate lawyers bring insight, knowledge and expertise to every transaction, applying in-depth expertise to a wide spectrum of residential and commercial property transactions.
We have also assisted major domestic and international developers, investors, real estate funds and asset managers on matters relating to purchase, management and disposal of commercial, residential, industrial, leisure and retail properties, and leasing of land in Italy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.