Objective: They say “money makes the world go round” – whether true or not, you will need to become acquainted with the way the financial system works in Italy so you know exactly how to manage your finances to your best advantage.

It’s important to understand the costs and finance options available when buying a property in Italy. In this Guide I can’t cover all your options, but let me mention a few to get you started.

In almost all cases, you’ll need to pay a deposit, usually around 10% of the purchase price. You can get the money for this from your savings, from re-mortgaging existing property, or from selling property or see the chapter on , ‘Consider your Finances’.

Once you decide to buy a property, you may choose from the main options to purchase:

a. Pay outright

b. Get a Sterling based mortgage

c. Get an Italian mortgage

d. Get a mortgage in another currency

Let me briefly explain each of these:

a. Pay outright – Well, this is quite obvious. If you’re lucky enough to be cash rich you can pay for your dream property or investment entirely with ready money or simply use cash to pay a deposit. However, there are reasons why you might want to get a mortgage even if you don’t need it – seek the advice of an Independent Financial Advisor or Italian Mortgage Broker here.

b. Get a Sterling based mortgage – If you read through various magazines, you’ll notice that many high street banks are offering mortgages for various European countries. You may want to finance your Italian property this way. Contact either a bank or a mortgage broker to get full information on rates, deposit requirements, security and so forth pertaining to Italy…

c. Get a mortgage based in Italy. Italian banks are very happy to organise mortgages to non-residents, though they will not be so keen to lend money on a ruin that needs extensive renovation. The maximum loan to value for lending in Italy is 70% for non-residents, the maximum term is 30 years with rates of around 4.9% for variable rate mortgages and slightly higher for fixed rate mortgages. The maximum age at the end of term is variable according to a person’s financial circumstances.

If you repay your mortgage in Sterling but have a Euro mortgage, you could have issues if the Euro strengthens against the pound – unless, of course, you’ve fixed a rate of exchange with a currency broker ahead of time – clever you!

For example, on a €100,000 (£69,000) mortgage, you’d pay €500/month (£345/month if the exchange rate was €1.45 to the pound (if only! at the time of writing it was €1.39.). However, if the rate went down to €1.30 to the pound, the monthly repayment would increase to £385. An instant increase of £45 extra per month – this is £540 a year!!!

To purchase a property a deposit of at least 10% of the purchase price is required and normally the higher your deposit, the better interest rate you receive. Borrowers must take out a life insurance policy.

d. Off-shore mortgage - You might want this sort of mortgage to finance your Italian property because of tax issues. It’s best for you to consult a professional to get comprehensive advice.

Before you decide on a property, make sure that you secure a provisional mortgage offer. This means you know exactly what you can spend. Your Independent Financial Advisor (IFA) or mortgage broker can help you to decide on the best type of mortgage for you and how much you’ll be able to borrow. For more advice please go to: http://www.ItalyBuyingGuide.com/resources.htm and we will be happy to deal with your more specific enquiries once we have received your form.

Some people have used their existing properties at home to raise finance to buy their properties outright, thus saving on interest and hassle.

You should budget on a portion of the purchase price to cover purchase costs. This may include the transfer tax, any VAT payable, legal fees, notary or legal fees and land registry fees. Estate agents’ commission must also be costed in – it will be 3% of the purchase price, and is not included in the purchase price.

Go with your lawyer to carry out a final check of the property before completion. You should check for fixtures and fittings that were included in the price and any structural damage that might have occurred since your last viewing. If there are any problems, you can ask for a reduction in the price or some other form of compensation. This may slightly delay the signing of the deed.

When I bought my house, a strong storm had lifted off half the roof ridge tiles. I spotted this the week before the sale and, having alerted the estate agent, I was promised that the tiles would all be replaced in time. The day before the sale my partner climbed on to the roof of the property and discovered that the owner had simply placed the ridge tiles on, and not actually attached them in any way. Needless to say, I had time to organise a discount to cover the costs of paying a builder to cement the ridge tiles on properly.

As always, it is highly recommended that you seek specialist advice from independent solicitors and currency exchangers before buying any overseas property.

When dealing with such large purchases many people fail to take absolute responsibility for their actions. You must keep in mind that the legal system in Italy may not be in your favour if troubles strike, so it’s paramount that you hire qualified people that can ensure your financial future.

Before ending this section I wanted to mention a very helpful site that you might find useful: Join Credit Expert. This allows you to enter your details and get a free credit report. To get more information on Join Credit Expert go to: http://www.Italybuyingguide.com/links.htm#credit This will allow you to check your credit history BEFORE you apply for a mortgage to ensure that it’s correct and avoid any unnecessary delays.