The dream of buying a home is still one of the most widespread among Italian families, but this is not always possible to achieve, especially due to the high costs: different credit institutions offer solutions such as 100 percent mortgages that cover all financial charges related to the purchase of a property. Benefiting from such a solution are above all the young people who, in most cases, do not have the necessary liquidity to pay as an advance payment for the first home loan: this undoubtedly involves both the advantages and the greater guarantees required by the bank lending to the applicant, not to mention that the amortization plans are very long for the total coverage of the cost, inevitably also involving additional costs for the beneficiary of the loan. Let’s analyze in detail who the 100% mortgage is for and how it works.
As is easy to see, 100% mortgages represent a specific product of the mortgage family, which has the main peculiarity of being a loan that can cover the total amount necessary to buy the property. From a strictly technical point of view, the basic characteristics of the 100% mortgage are those of the standard product, if a first home purchase request is made: the duration of the amortization plan and the required guarantees, which are necessarily higher, change by the will of the credit institution that wants to be protected in case of possible insolvency of the beneficiary. Generally a bank finances up to a maximum of 80 per cent of the total cost of the house, but there are categories of people who do not have sufficient liquidity to afford to buy the property with the traditional mortgage. Although young people under 35 are naturally predisposed to applying for a 100 percent mortgage, this type of financing can be requested by anyone without preclusion, provided that the conditions for access to finance set by the credit institutions are respected.
In particular, among the additional guarantees requested by the lender with respect to the traditional product, 100 percent mortgages provide for the obligation to subscribe a surety insurance policy, a protection explicitly provided for by the Bank of Italy, which codified the request through the ICRC resolution of 22 April 1995 reserved for land credit, art. 38 paragraph 2 of the Consolidated Banking Act, reserved specifically to cover the part exceeding 80 per cent of the value of the property. In summary, without this surety insurance, the bank cannot grant an amount exceeding 80 per cent of the value of the mortgaged property: it is up to the discretion of the individual credit institution whether to request the client for the consideration of the policy at the time of stipulation of the loan agreement, or take charge of it to retaliate later on the buyer.
From the point of view of interest rates, 100 percent mortgages enjoy the same conditions as traditional first home loans on the credit market, therefore with fixed and variable interest rates, and TANs and APRs that vary according to the institution selected credit. The choice of the fixed rate involves the guarantee of a constant installment for the entire duration of the amortization plan, which in the case of a long-term mortgage such as this, which can last up to 40 years, can represent a considerable advantage, ensuring the benefiting from a rationalization of expenses and the certainty of not suffering sudden market fluctuations. Vice versa, the 100 per cent variable rate mortgages allow the applicant to take advantage of particularly advantageous indices, thus paying considerably less in good periods than those who rely on the fixed rate, but with the constant risk of being at the mercy of possible fluctuations in the financial market, which could result in an increase in the monthly repayment rate.