Mortgages for Non-Resident Buyers

Picture a kitchen table in another country, a laptop open on the photographs of a stone farmhouse, and a notebook with one line already written: ask the bank.

Will an Italian bank lend to someone who lives abroad?

Each bank answers for itself. Whether a bank lends is a matter of its own credit policy, and it may take account of the borrower’s country of residence, nationality, income and existing relationship with the group. The criteria differ from bank to bank, change over time and are not published in a single source.

The loan itself has a name. A loan for the purchase of a property, secured by a first-ranking mortgage over it, is called a credito fondiario or mutuo ipotecario. Consumer real-estate credit is a medium to long-term financing that the Bank of Italy describes as typically lasting from 5 to 30 years. The interest may be fixed, variable, mixed or two-rate. Variable rates follow reference indexes such as Euribor, and fixed rates follow indexes such as Eurirs.

Borrowing in the country of residence against other assets is another thing again. It is a different arrangement from an Italian mortgage, and a matter for a financial adviser in that country.

How much will the bank lend?

Lenders set their own limits, and banks may lend less than the ceiling. The regulatory ceiling for a credito fondiario loan is generally 80% of the value of the mortgaged property, or of the cost of the works to be carried out.^[1] A resolution of the Interministerial Committee for Credit and Savings allows it to be raised to 100% where supplementary guarantees are given, such as bank or insurance guarantees, in line with criteria set by the Bank of Italy.^[1] Where earlier mortgages exist on the property, the residual capital is added.^[1]

Two further points apply to any Italian mortgage. The mortgaged property is valued by an expert, and the valuation is used to determine the amount that may be lent. It can differ from the price agreed with the seller. The lender also assesses the borrower’s capacity to repay on documented income, according to its own procedure.

What will the bank ask for?

The documents are set by each lender. Commonly requested items include proof of income, such as tax returns, payslips or equivalents, together with bank statements, information on other assets and liabilities, identification, an Italian tax code and information on the origin of the funds. Documents issued abroad may need a translation and a certification such as a legalisation or an apostille, depending on the country of issue and on the body that receives them.

Lenders and notaries are both subject to anti-money-laundering rules. The notary (notaio) carries out legality and anti-money-laundering checks, according to the National Council of Notaries.^[2] Payments in a sale must be traceable and declared in the deed.^[3] See “The Bank Account and the Source of Funds” and “The True Cost of Buying a Home in Tuscany”.

What if my income is not in euro?

A borrower whose income is in a currency other than the euro and who takes a euro loan has a euro liability against income in another currency. The instalments are set in euro. The income that funds them is not.

The Bank of Italy’s model information sheet for consumers asks lenders to explain the effects of foreign-currency loans for the customer.^[4] The same exposure exists in reverse when a loan is not in the currency of the borrower’s income. The rate of exchange applied to the transfer of the purchase funds is a cost to be checked with the bank or intermediary that performs it.

How does a mortgage fit with the preliminary contract?

The preliminary contract usually includes a deposit, the caparra. Under the Civil Code, a caparra confirmatoria, the confirmatory deposit, is kept by the party that receives it if the other party defaults, or returned or doubled on the other side’s default, depending on the case.^[5] See “How a Foreigner Buys Property in Italy”.

The Civil Code also allows the parties to make the effectiveness of a contract subject to a future and uncertain event.^[6] Whether and how a condition relating to financing is included in a preliminary contract, and what it provides if the loan is refused, is set by the contract and is a matter for the buyer’s lawyer. Financing conditions are usually discussed with the lender before the preliminary contract is signed.