It is very rare for Italian mortgage providers to offer mortgages of more than 80 percent of the property value. In fact, the average is normally around 60 percent of the market value.
Introduction to Mortgages in Italy
Mortgage Options in Italy
As with any property purchase, regardless of where it is based, it requires financing, usually through some form of mortgage. When purchasing a property in Italy, there are several options available to someone looking to purchase, including buying with the assistance of an Italian mortgage.
Obtaining an Italian Mortgage
Interest rates in Italy are generally considerably lower than those in the UK. Italian interest rates are around the 2 percent mark and this seems unlikely to alter. As with the UK, interest rates are reviewed monthly and this could, of course, change.
An anomaly is that Italian mortgages are repayable over approximately 10 to 15 years and rarely longer, meaning that monthly payments are likely to be higher than in other countries and this needs to be accounted for.
It is also very rare for Italian mortgage providers to offer mortgages of more than 80 percent of the property value. In fact, the average is normally around 60 percent of the market value. The implications for investors are that they are obliged to put in a lot of their own equity, if planning to take advantage of the favourable interest rates in Italy.
On the positive side, fixed rate mortgages are commonplace in Italy, often at around 1 percent above the base rate. These fixed rate mortgages are available for the entire life of the mortgage, thus offering a degree of certainty about the level of payments.
Mortgage Market in Italy
Mortgages do not have the same market position in Italy as they do in the UK. Italians generally do not buy and sell properties and use them as investments in the way that is commonly seen in the UK. Furthermore, when Italians purchase a property, it is often bought for cash and is also generally seen as a one-off purchase. Regular mortgaging is simply not on the agenda!
This means that the mortgage providing market is not as well populated in Italy as it is in the UK, reducing the amount of competition in the market place. With less competition and the effect of economies of scale, the fees are generally higher than in the UK and this should be borne in mind when considering an Italian mortgage.
Amount that can be Borrowed on an Italian Mortgage
Italian lenders calculate the maximum amount that can be borrowed differently, with reference to the monthly income of the borrower and not based on total income. A lender will generally only allow a repayment amount of one third of the net disposable income that the borrower earns every month.
The mortgage market in Italy is less competitive, meaning that arrangement fees are comparatively higher than in the UK;
interest rates are lower in Italy and fixed interest rate mortgages are readily available;
Italian lenders will normally only offer a maximum of 80 percent of the property value; and
the amount that can be borrowed is calculated with reference to monthly disposable income.