First-home mortgage (mutuo prima casa): how it works

As a rule, the bank lends up to 80% of the property's value. Example: home valued at €100,000, mortgage up to €80,000. You cover the remaining €20,000 plus the costs.

What a mortgage is and what the bank asks of you

The mortgage (mutuo) is a loan that you repay in instalments over a number of years agreed with the bank. The home is given as security through a mortgage lien (ipoteca), meaning a right of the bank that is recorded in the property registers. If you stop paying, the bank can ask for the property to be sold to recover what you owe it.

Before giving you the money, the bank must assess whether you will be able to repay it. This assessment is called creditworthiness (merito creditizio). It will ask you for documents on your income, your job and your fixed expenses, such as rent, other loans or maintenance payments.

The bank will also carry out an appraisal report (perizia), meaning an estimate of the property's value. The loan does not exceed that value and, as a rule, does not exceed 80% of it.

How much the bank can lend you

The amount depends on two things: the value of the home and your ability to pay the instalments. If the appraisal report values the home at €100,000, the bank will, as a rule, lend you up to €80,000.

In particular cases the bank can go up to 100%, but only with additional guarantees, such as a personal guarantee (fideiussione) or the Consap guarantee fund (Fondo di garanzia Consap). Who can qualify is explained in the guide on the 100% mortgage.

To work out how much the bank may lend you based on your salary, read how much mortgage I can get with my salary.

What a mortgage costs beyond the instalments

The instalment is not the only cost. There are arrangement fees, appraisal fees, insurance and deed costs. You can find the full picture in mortgage costs: arrangement fees, appraisal, insurance.

An important item is the substitute tax on mortgages (imposta sostitutiva sul mutuo). It is a tax you pay only once, when the loan is disbursed. For a first-home mortgage it is 0.25% of the amount disbursed. For other mortgages it is 2%.

Example: first-home mortgage of €80,000. - Tax: €80,000 × 0.25% = €200.

The notary, for the notarial deed (rogito), is as a rule paid by the buyer. Their fee has no mandatory tariff, so ask for it before you sign.

Fixed or variable rate and what to read in the documents

A fixed rate does not change for the whole life of the mortgage. A variable rate follows a market benchmark and can rise or fall. With a fixed rate you know how much you will pay each month. With a variable rate the instalment can change over time. The differences are explained in fixed or variable-rate mortgage.

In the bank's documents you will find two acronyms that are often confused. The TAN is the nominal interest rate, meaning the rate used to calculate interest. The TAEG is the total annual cost, which also includes the mandatory charges of the loan. To compare two offers, look at the TAEG, not just the TAN. The differences are explained in TAN and TAEG: the differences.

The bank must give you the European Standard Information Sheet (prospetto informativo europeo), a standard document that summarises costs and conditions. Read it carefully. There is also a reflection period before signing: you should check the exact timing with the bank.

The Consap guarantee fund: when it can help you

The First-home Guarantee Fund (Fondo di garanzia per la prima casa) is a State guarantee on the mortgage, managed by Consap. It covers part of the loan, so the bank feels more secure. The fund applies to mortgages up to €250,000.

The guarantee is 50% of the capital portion for the general body of borrowers. For certain categories it rises to 80%: under-36s, young couples, single-parent families with minor children and tenants of IACP public housing. In this case an ISEE (equivalent income indicator) not exceeding €40,000 is also required.

The rules change, so check the requirements and extensions on the Consap website before applying. For the case of young people, read Consap mortgage for under-36s.

The fund also applies to those buying at auction, because it guarantees the mortgage and not the purchase deed.

Tax relief on interest

If the mortgage is for your first home, you can deduct 19% of the interest paid in the year from IRPEF (personal income tax). The limit is €4,000 of interest per year.

Example: if you paid €4,000 of interest in the year, the deduction is €4,000 × 19% = €760.

The deduction reduces the tax you pay, not your income. To use it you must meet the first-home requirements and keep the interest summary that the bank sends you. The requirements are summarised in the tax guides of the Italian Revenue Agency (Agenzia delle Entrate).

What changes if you buy at auction with a mortgage

In a court auction (asta giudiziaria) you can pay the price with a mortgage. The Code of Civil Procedure provides for this in Article 585: the bank pays the money directly into the proceedings and the mortgage lien is registered together with the transfer decree (decreto di trasferimento).

Timing is the critical point. The balance must be paid within 120 days of the award (aggiudicazione), and this deadline cannot be extended. For this reason, the process with the bank should be started before the auction, not after. Ask the bank whether it considers properties bought at auction and what documents are required.

What happens if you repay early or change bank

You can repay the mortgage before it expires. For mortgages taken out since 2007 by individuals to buy or renovate a home, early repayment carries no penalties.

You can also move the mortgage to another bank through a surrogation (surroga), at no cost. The details are in the guide on early repayment of a mortgage.

In practice

• Ask the bank for the TAEG of each offer and compare them; do not look only at the TAN.
• Calculate the substitute tax: 0.25% of the amount if it is a first home, 2% in other cases.
• Check whether you qualify for the Consap guarantee fund and verify the current requirements on the Consap website.
• Keep the summary of interest paid: you need it for the IRPEF deduction.
• If you buy at auction, start the process with the bank before the sale, because the balance must be paid within 120 days.

Frequently asked questions

Does the mortgage cover the whole price of the house?

As a rule, no. The bank lends up to 80% of the value estimated by its appraisal report. You must cover the rest, plus the costs. With additional guarantees, in some cases it is possible to reach 100%.

Can I repay the mortgage early without paying penalties?

For mortgages to buy or renovate a home taken out since 2007 by individuals, early repayment carries no penalties. The contract and the bank's information document confirm the conditions for your case.

Can a mortgage be used to buy at auction?

Yes. In a court auction the balance can be paid with a mortgage secured on the property itself, as provided by Article 585 of the Code of Civil Procedure. However, the timing is tight: 120 days.

Sources

• Consolidated Banking Law, Legislative Decree 385/1993
• Substitute tax on mortgages, Presidential Decree 601/1973, art. 18
• First-home guarantee fund, Law 147/2013, art. 1 para. 48
• Consolidated Income Tax Law, Presidential Decree 917/1986
• Code of Civil Procedure, art. 585
• Bank of Italy, guide «Buying a home: the mortgage»
• Italian Revenue Agency, tax guides