Thanks to the entry into force of the Law no. 44/2015, from May 6th, it is now possible to obtain a mortgage loan by exploiting the value of the own property.

From a technical standpoint, such solution is known as “life mortgage loan” and it has been introduced in Italy in 2005 for the first time, but it was already in use on common law systems, under the name of “reverse mortgage”.

This is a mean by which people, aged from or over 60, may request the bank to grant a funding on the basis of the value of the own property (up to 50% of its market value), on which a mortgage is registered.

The loan shall be granted immediately, however the property will continue to be inhabited by its owner until the time of death.

The regulations provide that the loan shall be reimbursed, besides the latter event of death, in the cases of total or partial transfer of ownership as well as of other property rights linked to the property, whether if the value of the property relevantly decreases. In the first case (death of the owner) a ‘derivative’ relationship is formed between the bank and the heirs, which may decide whether they settle the owner’s debt for the loan at the same time of the mortgage’s deletion or sell the property. In the other two cases, it is clear that the legislator intended to ensure the bank that, parameterizing the loan amount to the value of the property, would be undermined in relation to its warranty claim.

The obligation towards the bank shall be performed within 12 months from the occurrence of the afore-mentioned events: if the full repayment is not provided on time, the property could be sold at the market price. By this way, the amounts obtained through the sale of the property will be used to settle the obligation; if during the next 12 months, the sale is still negative. the value of the property would decrease of 15% for year, until its completion. Moreover, the sale could be managed also by the heirs, as mutually agreed with the bank: in this case, if the sale is completed within 12 months, any residual sums will be designed in favour of the heirs.

One further question that could be asked concerns interests, expenses and capitalization; in fact, too high interest rates always put a brake on the call for this system. In such regard, the regulations recognise a significant benefit to the owner, due to the provision under which interests and expenses may be prorated on lifetime, avoiding the capitalization and the full payment at the expiry date. For the protection of the bank, it is provided that where the payment is delayed for seven times (a delay between 30 and 180 days from the due date), the loan agreement may be terminated.

Further benefits are established from the tax standpoint: the property-related taxes (as Tasi, Imu and Tari) will be on charge of the lender, in so far as the latter will continue to live and enjoy in. Nevertheless, the agreement will be tax-free in relation to stamp duty charge, register fee, cadastral and mortgage taxes and also to indirect taxes on raising of capital.

BLB Law Firm has an extensive knowledge on banking and credit sector, as well as on real estate, that allows us to suggest the more convenient strategies in terms of warranty, profitability and investment success to the customers. This Law, in the light of our previous experience, could bring innumerable benefits, foremost to support those who holds riches but needs cash.