First introduced in 2014, Italy’s rent-to-buy (affitto con riscatto) scheme is something of a hybrid between renting and purchasing a property, intended to help prospective buyers secure a home without immediately needing full financing.
It essentially allows you to rent a property for a set period of time (from three to ten years), with the option to purchase it at the end of the rental term.
The affitto con riscatto path offers the unique benefit of allowing you to move into a house or apartment right away and put off the purchase decision to a later date.
This makes it an appealing route for anyone who may be unsure about making a big financial commitment straight away, or struggling to get a mortgage from a bank.
How does the rent-to-buy scheme work?
The first step of the process involves negotiating with the seller and agreeing on a property purchase price (this remains locked until the end of the rental term) and a rental contract, which must be between three and ten years of length.
Under the contract, you’ll be able to move into the home immediately, but will have to make monthly payments. These will include a rental fee plus an additional fee, which will be credited towards the final purchase price if you choose to buy at the end of the rental term.
This means that the amount you pay each month will be higher than what you may typically pay under a normal rental agreement, but the extra money you pay will be deducted from the purchase price.
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For example, let’s say a property costs 200,000 euros, and you agree to a ten-year rental contract with a monthly payment of 1,000 euros split evenly between rent (500 euros) and the additional fee (500 euros) for a total of 12,000 euros per year.
Over the ten years, you’ll pay 120,000 euros, of which half (60,000 euros) will be subtracted from the purchase price.
This means that, if you choose to buy the property at the end of the contract, you'll ‘only’ have to pay the remaining 140,000 euros.
What if I don’t end up buying?
If you decide not to purchase the home at the end of the term, the owner will keep the portion you paid as rent.
The additional fee, however, is treated differently, and you may receive part of it back if you decide not to move forward with the purchase.
This all depends on the type of contract you signed.
Under some contracts, you may get up to 50 percent of it back, while others may not have such a clause, meaning what you paid towards the final purchase will be effectively ‘lost’.
This is one of the crucial things you’ll have to look out for when signing the contract.
Pros
The affitto con riscatto can be an advantageous option for anyone who may be struggling with financing and need extra time to find the required funds to purchase a property as it essentially allows you to delay the purchase decision while also securing a home in the meantime.
The scheme may be a particularly good fit for foreign nationals as they often face additional hurdles when trying to get a mortgage (or securing good rates and conditions) in Italy.
And the contract is non-binding, meaning that, if you still can’t secure the required financing, you can choose not to move forward with the purchase and move out at the end of the rental contract.
As a second advantage, if a property’s value soars, the price you’ll eventually pay for it if you choose to buy will not change as the amount is locked upon signing the contract.
It’s also worth noting that if you do decide to purchase, the fees you paid on a monthly basis will be automatically deducted from the final price. This means you’ll be applying for a lower mortgage amount, saving on interest and paying lower instalments.
As a final point, you won’t be required to pay property tax IMU or special maintenance and repair costs during the rental period as the property owner is responsible for those expenses.
Cons
Though it comes with major advantages, the scheme also has non-negligible downsides.
Firstly, if you decide not to buy the home, you might lose part or all of the monthly fees you paid on top of the rental fees. This all depends on what is stated in your contract.
As a second point, a property may depreciate significantly over the rental term, but you’ll still have to buy it at the previously agreed price (this remains locked and cannot be altered, unless the owner chooses to lower it).
READ ALSO: Five things non-residents need to know about buying property in Italy
Finally, the market for properties available under the rent-to-buy scheme is very limited, according to Italian real estate experts.
Most sellers will resort to the rent-to-buy option only when there is little competition and low chances of selling the property straight away.
This means that rent-to-buy properties are usually available in less attractive areas (for instance, suburban neighbourhoods or isolated rural areas).
So what’s the verdict?
The rent-to-buy option offers great flexibility when it comes to making the life-changing decision to purchase a home.
Whether you can’t immediately access a mortgage or are not ready to commit, it allows you to secure a property and put off the purchase decision to a later date.
And, as mentioned above, the contract is non-binding, meaning you’ll have the freedom to decide whether to buy or not at the end of the rental term.
That said, there are also major disadvantages, including the possibility of losing the additional fees paid on top of rent if you decide not to move forward with the purchase.
Further, the pool of rent-to-buy properties currently available is very limited and those that are may be located in less attractive areas.
Please note that The Local cannot advise on individual cases. For more information about Italy's rent-to-buy option, contact a qualified real estate expert.
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