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Italian property mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 5th July 2019 *

Many UK residents are tempted by the prospect of buying property overseas, either to be used as a holiday home, a buy to let investment, or simply somewhere with a change of scenery to settle down after retirement.

You can get a lot more for your money in some parts of Europe compared to the UK, and Italy is no exception. This beautiful country is renowned for its contributions to the worlds of art, architecture, fashion,and film - not to mention the food.

But how do you go about applying for mortgages in Italy? What do you have to consider when buying overseas? And is it possible to get a mortgage for Italian property as a UK resident?

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Can I get a mortgage in Italy?

Yes, it may well be possible, and It’s easy to see why so many non-residents look to buy property in Italy; there’s something very romantic about the language and stunning scenery, and it makes the perfect getaway or retirement destination.

While there are banks willing to offer mortgages to non-residents who want to buy and/or refurbish an Italian property, mortgages in Italy are slightly different for non-residents as the market is relatively conservative compared to the UK.

How do mortgages work in Italy?

Italian mortgages are usually capped at around 60% loan to value (LTV), although some lenders will stretch to 80% LTV in exceptional circumstances. This means that you may have to scrape together a pretty hefty deposit.
What’s more, mortgages in Italy tend to be over a 15 year term - quite a difference compared to the standard 25-year period in the UK - potentially meaning higher monthly payments than you’d budgeted for.

When it comes to affordability, most Italian mortgage terms stipulate that your existing outgoings should account for no more than 40% of your monthly income. Your mortgage will then be calculated so that your monthly payments don’t exceed 30% of your income, to minimise the risk of defaulting.

One of the main benefits of a mortgage on an property in Italy is that fixed-rate loans tend to be the norm, meaning competitive long-term interest rates for the buyer.

UK mortgages for Italian property versus remortgaging

As discussed, one option is to buy a property in Italy with an Italian mortgage, either through a UK lender or directly with an Italian bank. If this isn’t suitable, you could consider remortgaging or securing an additional loan on your current UK property to buy the property in Italy with cash.

Before making a decision to remortgage, ensure that you will be able to keep up with the repayments for a larger mortgage for the life of the term. Using your main place of residence as collateral could put your living situation at serious risk if you fall into financial difficulty.

We recommend getting in touch with a specialist Italian mortgage broker or whole of market broker such as the ones we work with before making a decision. We’ll refer you to a leading overseas expert who can calculate the most cost-effective solution for your Italian mortgage, based on your own specific circumstances.

What to consider before getting a non-resident mortgage in Italy

Tax

Ensure to account for all the tax you’re liable to pay, both in the UK and Italy. One small mistake regarding much tax or what tax you need to pay could end up a lot of money in missed payments and fees and penalties.

Check the paperwork

Read through any documents and contracts carefully. Your mortgage broker and lawyer can do this for you to confirm that you have the correct permissions, licences and planning consents before you sign any contracts.

Exchange rate changes

Having a mortgage in a foreign currency means that your payments will change in line with the exchange rate. Over a period of 15 years, this could have a significant impact on your monthly payments, which is why it is usually preferable to have a mortgage in the same currency as your income.

But don’t panic if this isn’t possible. To protect borrowers, lenders must legally tell you if the exchange rate fluctuates by more than 20% and then offer you the option to repay the mortgage in another currency.
For more information on how exchange rates might impact your Italian mortgage, get in touch, or find out more by visiting our overseas property section.

Why you should seek professional overseas mortgage advice

Before you proceed with a mortgage, ensure to seek legal advice from a lawyer who is independent of everyone else involved in the process, including the seller, developer and estate agent.

To avoid any mistakes, work with a lawyer that is fluent in English and Italian, and familiar with property law in Italy. Accurate advice is paramount when during the mortgage process, especially for overseas property.

If you’re using a UK legal firm, check that they’re registered with the Law Society, and that they specialise in international transactions and property conveyancing.

Lenders and mortgage rates in Italy

We work with over 100 different lenders covering almost every niche imaginable and can carry out a thorough comparison on current Italian mortgage interest rates with high street banks including Barclays and HSBC.

If you’d prefer, we can also put you in touch with specialist overseas mortgage providers who can find you the most competitive Italian bank mortgage rates, and assist you smoothly through your purchase. Get in touch to speak to an expert today.

What other factors impact eligibility for Italian mortgages?

Many of our customers want to know how to get the best mortgage rates in Italy, and it comes down to two things: having whole-of-market access (the advisors we work with can help you there) and meeting the eligibility criteria of as many lenders as possible.

There are a number of factors that influence your eligibility for any kind of mortgage. For one, every lender will take a look at your credit history, as some providers have strict rules around what forms of adverse credit they will consider.

Many lenders impose age restrictions or maximum lending terms for older borrowers, and Italian banks are especially strict in this aspect - most stipulate that they will only lend to you if your mortgage is fully paid by the time you’re 70.

Non-standard construction types

A large proportion of Italian properties are flats due to the large demand for homes in and around major cities. The buildings are usually several stories high, with flat roofs and balconies for each apartment to provide outside space.

On the subject on multi-storey buildings, most lenders require there to be a lift if the property is five or more stories high.

Flat roofing is one of the most common forms of non-standard construction type, and some UK lenders can be very strict about lending on non-standard builds, although Italian banks may be more flexible as it is the norm.

How to get a mortgage in Italy

The best place to start is by contacting a whole-of-market broker, as they can help you find a lender most suited to offer you favourable rates on a mortgage in Italy.

This is a better option than going to multiple lenders direct in search of the best rates, as having too many hard searches on your credit file can have a negative impact on your credit rating, not to mention the amount of legwork this involves.

Make an enquiry to kickstart your application today.

Why you should speak to a whole of market mortgage broker

We’ve helped over 65,000 people find the right mortgage, even those who may have been declined a mortgage or had bad credit history.

In fact, our customers consistently rate us 5 stars on Feefo, mainly due to our high levels of service, but also because we offer offers a 5-star service with access to expert brokers who are:

  • Whole of market.
  • Have a working relationship with all lenders who consider Italian.
  • mortgages, not just a select few.
  • Already know the lenders to go to for Italian mortgages as they successfully arrange these deals already.
  • Can offer bespoke advice on Italian mortgages.
  • OMA Accredited advisors.
  • Have completed a 12 module LIBF accredited training course.

Talk to a non-resident Italian mortgage expert today

If you like what you’re reading or require more Italian mortgage advice, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee, and there’s no obligation or marks on your credit rating.

Updated: 5th July 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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