Frequently Asked Question #80:
Q: What financing is available to purchase a property in Italy?
A: It is possible for both EU and non-EU citizens to obtain a mortgage in Italy. Italian banks ask for a proof of income in your home country, and for a reference from your home bank. The amount you can borrow depends primarily on your annual income: the higher your income, the more you can expect to borrow.
The common method of providing the loan is a variable-rate Euro mortgage. Euro-denominated mortgages may be based on the European Central Bank (ECB) Main Refinancing Operations (MRO) fixed rate: more commonly they are based on the Euribor 3 month rate (E3M).
Unlike the ECB MRO fixed rate, Euribor rates change every working day. To calculate the rate of interest you would have to pay if you were to obtain a Euro mortgage today, visit the Euribor website (link given above) to see the latest E3M figure. This will be slightly higher than the MRO fixed rate if Euro interest rates are trending upwards, and slightly lower if Euro interest rates are trending downwards.
Use the E3M figure to obtain your mortgage rate from the following table:
| Repayment Term | |||||
|---|---|---|---|---|---|
| Capital | 10 Years | 15 Years | 20 Years | 25 Years | 30 Years |
| Less than €100,000 | E3M + 1.20% | E3M + 1.30% | E3M + 1.40% | E3M + 1.50% | E3M + 1.65% |
| More than €100,000 | E3M + 0.95% | E3M + 1.05% | E3M + 1.15% | E3M + 1.25% | E3M + 1.40% |
Note:
- The fixed percentage figures in the table are the "spread", i.e the profit of the bank.
- The longer the loan term, the higher the spread (because the risk to the bank increases).
- The larger the loan, the lower the spread (because the fixed costs of the bank represent a lower proportion of the loan).
- Because E3M changes daily, repayments will fluctuate in line with the E3M in the month preceding each repayment.
- The information in this FAQ is based on the typical experience of our clients: the rates offered in specific cases may vary slightly from the figures presented, particularly because spreads vary between banks.
Examples
1) On 3rd January 2011, I take out a loan of €200,000 to be repaid over 20 years.
Using our mortgage calculator with a monthly (standard) basis of calculation, I see that my repayments would be €1026 per calendar month.
2) On 14th January 2011, I take out a loan of €80,000 to be repaid over 15 years.
Using our mortgage calculator with a monthly (standard) basis of calculation, I see that my repayments would be €526 per calendar month.
Note that there are generally no penalties if you want to pay a mortgage back early.
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