There are no restrictions on foreign ownership of property in Italy, nor is there any requirement to use an Italian mortgage to purchase your property.
If you are planning to buy in Italy, you have two main choices:
- Take an Italian mortgage, normally in Euros (either through a UK lender or direct with an Italian bank)
- Remortgage or secure an additional loan on a UK property and use this money to buy your Italian property for cash
Both approaches have advantages and disadvantages. Here are a few things to think about when deciding what’s best for you:
- Having a mortgage in a foreign currency means that your payments will change with the exchange rate – over 10-15 years, this can result in significantly increased (or decreased) monthly payments, even with a fixed-rate mortgage. For this reason it can be wise to make sure all your loan payments are in the same currency as your income.
- Italian mortgage lenders have more conservative lending policies than UK lenders. You may find it harder to get an Italian mortgage than to secure an additional loan on your UK property.
- Historically Eurozone interest rates have been slightly lower than UK rates, making Euro mortgages cheaper. There is no guarantee that this will continue to be true.
One of the best ways of finding out where you stand is to contact a specialist independent mortgage broker in the UK to discuss your options. They should be able to look at your personal circumstances and explain what choices are available to you and how much you can afford to borrow.
Getting A Mortgage In Italy
The Italian mortgage market has expanded considerably in the last few years, but is still relatively conservative and restricted compared to the UK market.
Italian mortgage lenders will normally only offer mortgages of up to 60%-80% LTV (i.e. 60%-80% of the purchase price) and there are no self-certification or non-status mortgages.
Mortgages will typically be over a 15 year term, rather than the 25+ years UK lenders expect. Most lenders will also require you to have paid off your mortgage completely by your 70th birthday.
Lending decisions are based on affordability:
- Your existing outgoings must be no more than 40% of your net monthly income
- Your mortgage will be calculated so that your monthly payments are no more than 30% of your net monthly income
Fixed-rate loans are the norm in Italy, which often results in quite competitive long-term interest rates.
If Your’re Employed
If you are employed, you will need to provide the following documentation when applying for an Italian mortgage:
- Last 3 months’ payslips
- Last year’s P60 and/or a reference from your employer
- Last 6 months’ personal bank statements
If You’re Self-Employed
As the Italian lenders do not offer self-certified or non-status mortgages, self-employed mortgage applicants will need to show:
- Copies of your last 2 years’ audited accounts
- Last 12 months’ business bank statements
- Last 6 months’ personal bank statements
Rental Income
Italian mortgage lenders will not take potential rental income into account when calculating what to lend you. You must be able to afford the property without its rental income.