For overseas property investors interested in Italy, a new rent to buy process of purchasing property is becoming popular.
Italian mortgages can often be difficult to come by for UK investors, as Italian banks do not like lending money to non-residents.
This leaves overseas property investors needing to pay in cash, or look for other alternatives to finance their purchase.
There is now a new way to purchase property in Italy in the form of vendor finance, also known as rent to buy. This scheme can offer greater flexibility to both vendors and buyers depending on their personal circumstances, and has been fully integrated into the Italian legal system and deemed a secure method to purchasing an Italian property.
The system works by arranging a contract that includes both the sale purchase and lease agreement in a single deed. The property is purchased in monthly instalments of which a significant amount is contributed towards the sale price and also a marginal percentage as rent. The exact percentages for eah are agreed by the purchaser and seller.
The property officially exchanges at the end of the agreed contract term, although the purchaser always has the right to pay the full remaining price in one sum and therefore finish the contract.
During the period of the contract the title deed is filed by an Italian notary chosen by the purchaser, allowing strong legal protection throughout the transaction. The deed is filed for ten years, though the contract duration can be shorter if so agreed.
With rent to buy the purchaser gets immediate use of the property as soon as the contract is agreed. This therefore allows the benefit of sub-letting the property short, medium or long term to receive income from the start.
There is also a saving to be made by not having to pay mortgage tax, currently 2 per cent of the lent amount.
All in all, rent to buy could be a serious option for UK overseas property investors to purchase their dream in Italy.