Even if you have never bought a house before, chances are you're aware that the usual route to getting the keys to your dream abode involves going through stacks of paperwork, negotiating here and there, and signing on dotted lines where appropriate.
Getting a mortgage also plays a huge role as most people (save for a lucky few) are not able to pay for their house upfront.
Fortunately for hopeful buyers, the mortgage rates (tassi dei mutui) in Italy are some of the lowest in Europe, with the country beating out key players such as Germany, France and the UK, according to recent data from mortgage website MutuiOnline.it.
This doesn't mean that house hunters should become complacent. While having enough cash and a stable job is an important starting point in securing a mortgage, there are also a range of other factors to be taken into consideration to squeeze out the best value for your money.
Choose the type that's best for you
The first step to consider when getting a mortgage is the type.
The most used types in Italy (and other countries around the world) are fixed-rate (mutuo a tasso fisso) and variable-rate mortgages (mutuo a tasso variabile). Deciding on which one you want largely depends on the interest rates (tassi d’interesse) you are willing to pay.
The former (fixed-rate) is best for those looking for consistency when paying their monthly instalments as payments remain the same from the beginning to the end of the contract, despite rising or falling interest rates.
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Whether this is advantageous or disadvantageous depends on your personal circumstances. An important factor to take into consideration when making the decision is that fixed mortgage rates are on average more expensive than variable rates.
A variable rate offers a lot more in terms of flexibility as repayments fluctuate in line with interest rates rising or falling. However, it’s always best to check the predictions for the upcoming year on interest rates to ensure you don’t end up paying through the nose.
A reputable site to check what’s around the corner before deciding which rate to choose is the Bank of Italy (Banca d’Italia).
Ask about the ‘spread’
The ‘spread’ unfortunately isn’t a table of food; think of it as a profit margin for the bank on the money lent. This is where things get a bit technical.
Depending on the institution (as well as the mortgage type), there are two key reference rates which you should be aware of when it comes to calculating spreads: EURIRS and EURIBOR.
EURIRS is an indexing parameter for fixed-rate mortgages and is equal to a weighted average of prices at which banks in the EU carry out an Interest Rate Swap (also known as IRS).
Alternatively, EURIBOR is an indexing parameter for variable-rate mortgages.
Both reference rates are released daily by the European Banking Federation and can be viewed online with ease on mortgage comparison website MutuiOnline.it.
The spread is the difference between either of these reference rates and the overall interest rate offered to the customer.
It remains unchanged for the entirety of the loan, but keep in mind that the higher the spread, the more interest you may have to pay on the debt.
It's always a good idea to ask potential providers what their spread is, just to get a fuller, more complete overview of what to expect.
Be in the know about the annual percentage rate
The annual percentage rate, or APR, refers to the total cost of your borrowing for a year. It’s not only limited to interest rates, but may include other things such as mortgage broker fees and additional costs.
Known as Tasso Annuo Effettivo Globale (TAEG for short), it may be an idea to inquire as to whether the proposed APR is valid for the duration of the mortgage and that it's not just a promotion. A lower APR may translate into lower monthly mortgage payments.
Location matters
Location is perhaps one of the most important factors to consider when buying, so checking out which areas in Italy have the highest mortgage payments is advisable.
It may come as little surprise that Italy’s financial hub Milan tops the charts in highest monthly mortgage payments at €1,500 on average according to housing site idealista, with Bolzano (€1,321) and Venice (€1,170) coming in second and third and Rome trailing behind in ninth place (€865).
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The places with the lowest mortgage payments are currently Biella (€178), Ragusa (€207) and Caltanissetta (€209).
Though where you buy shouldn’t be solely dictated by how much you can expect to repay, it’s still something you should know whne weighing up options on where to live.
Do your research and negotiate
Before heading to the bank, use online comparison sites to find a mortgage lender who offers rates suitable for you. Some of the most common sites in Italy include MutuiOnline.it and Facile.it.
You may be able to negotiate a better offer than what is offered online, especially if you set up a meeting with a mortgage advisor directly. Don't be afraid to say that a competitor is offering you a better rate, if that's the case, and ask how they can match it.
Don't be afraid to take any information (either digital or printed) with you to your meeting so you can easily compare different offers.
READ ALSO: Five pitfalls to watch out for when buying an old house in Italy
Finally, keep in mind that a mortgage advisor is ultimately a salesperson, trying to sell you a product. They have a vested interest in getting you to sign up to expensive add-ons or take out a fixed-rate mortgage at a higher rate, so ask for time to mull over their offer and look through any agreements in your own time at home.
Do you have tips on how to secure a good mortgage deal in Italy? Let us know in the comments section below.
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