MOST COMMON QUESTIONS ABOUT AN ITALIAN MORTGAGE

Everyone can obtain a mortgage, if it is possible to prove the capability to payback the loan amount in time. The broker will evaluate the client’s creditworthiness for this purpose.

The bank can generally grant an amount calculated on the value of the property to purchase. This amount can not exceed the 80% on the property value for Italians and clients having their residence in Italy and the 60% for non Italian clients.

Before you ask for a mortgage application, it is opportune to carefully evaluate your own incomes (especially in prospect) and, the ordinary expenses subtracted, to determinate your own monthly resources. An instalment not exceeding about one third of the disposable incomes is quite reasonable. The mortgage duration is agreed between the client and the bank and it is defined in the contract. It is one of the elements determining the instalment amount. The instalment is composed by principal and interest.

As agreed in the contract, the mortgage rate remains fixed during the whole duration of the mortgage. The fixed rate is recommended to whom who fears an increase in the market rates and wants to be sure of the amount of every single instalment and the amount of the total debt to be repaid from the very beginning, at the signature of the contract.

The interest rate can change depending on the established maturity date, planned on the starter rate, on the fluctuation of a benchmark, generally fixed on the monetary and financial markets. The main risk is an important increase of the instalment amount. Please, notice that an increase of the instalment amount is more significant if applied to long maturity date mortgages. On equal duration, the variable rates are lower than the fixed rates at the beginning, but they could increase during the time, resulting in higher rates, sometimes in relevant amounts. The variable rate is recommended to whom who wants a rate always in line with the market trend and can handle any possible increase in the instalment amount.

The interest rate can change from fixed to variable (or vice versa), following fixed maturities and/or specific conditions established in the contract. Advantages and disadvantages alternatively belong to the fixed rate or to the variable rate.

The amortisation schedule is the project of mortgage repayment: it is important to examine it carefully. The schedule establishes the provided sum, the instalment amount, the date by which the debt must be reimbursed, the instalment periodicity (month, trimester, semester), the parameters determining the amount of every single instalment and the remaining debt. The mortgage instalment is composed of:
Principal Payment: the amount of the returned financing
Interest Payment: the accrued interests
There are many ways to repay the loan.
The most common amortisation schedule in Italy is the so called “French” method: the fixed rate instalment is composed of an increasing principal payment and a decreasing interest payment. At first, you will especially pay interest. Considering the interest applied on the residual capital, the amount of interest gradually decreases and the principal payment increases as the capital returns. The variation of the instalment composition in principal payment and interest payment can influence the fiscal deduction, which amount can change year by year. The interest sum is deductible and decreases along the time. An example of amortisation schedule is included in the ”Prospetto informativo Europeo Standardizzato PIES”. It is about the fixed rate mortgages for the duration of the contract and about deferred interest reimbursements. In these cases, once the contract is signed, it is possible to obtain from the lender, in every moment of the working relationship, a free updated version of the amortisation schedule, which is provided al least once a year anyway.

The General Information Sheet provides for the info in a standard diagram. Depending on his own personal situation, the client can obtain different conditions. Info about client’s needs, his financial situation and his preferences collected, the broker provides him with the c.d PIES form (Prospetto Informativo Europeo Standardizzato) for free. It contains the personalised info, needed to consent a comparison among different offers on the market. The PIES has to return to the bank promptly, before the client becomes bounded by a credit deed or an offer. In the standard model, the form has to indicate the contractual conditions based on the client’s characteristics and the needs.

It is possible to transfer the mortgage to another bank in every moment and without any cost or sanction. This is the so named subrogation, allowing to pay the mortgage off using the amount given by another bank and maintaining the original mortgage. The sum will be reimbursed according to conditions agreed with the new bank. The original bank can not impede the mortgage transfer. The client has not to pay any other cost, nor indirect ( ex. commission, obligations or penalty), nor aimed at transferring the mortgage from a bank to another, nor to have a new loan.

If the loan is denominated in foreign currency, the client has the right to exchange it in its income currency or in the legal tender coin in force in its residency Nation at the moment of the signature of the contract or in the legal tender coin of its money exchange request. The client can take advantage of money exchange only if the exchange rate is equal or higher than the 20% at the moment of the closing of the contract. An all-inclusive fee can be required, if present in the contract, to benefit from the exercise of the exchange right. Please, keep in mind that a mortgage denominated in Ruros can be considered as foreign currency loan if, at the moment of the signature of the contract, the client receives the main part of his incomes in a currency other than Euro or it resides in a EU Country having a different currency.

Report made by a technician appointed by the bank on trustworthy standard bases. He attests the value of the property to mortgage.

The notary certifies in a specific document if the seller actually owns the property and the legal status of the property (ex. Presence of previous loans).

Agreement in which the client and the bank decide to change one or more elements of the preliminary contract (mortgage duration, indexing system, benchmark, spread or commissions related to the mortgage).

It indicates the total mortgage amount in a year. It is a percentage value on the total amount of the granted mortgage. It includes the interest rate and all the other expenditure items, such as banking investigation, instalment collection, taxes, ancillary services necessary to obtain the mortgage or related to the offered conditions (ex. Insurance policy). According to the law, it includes banking costs of opening and managing of a bank account, if required from the offered contractual conditions.
In case of variable rate, the TAEG is only reported as an explicative example, because it can change accordingly with benchmark trends. In the TAEG are included the evaluation costs on the pledged real estate. Notarial costs or penalties due to breaches of contractual obligations are not included.

The Eurirs is an interbank rate, fixed for all over Europe, and used as reference for fixed rate mortgages.

The Euribor is an interbank rate, fixed for all over Europe, and used as reference for variable rate mortgages.

It is the house where the client or his relatives “usually habit”, where it or they live. This is a tax denomination by the tax law and, the revenue authorities use it for some particular tax reliefs.