TAEG vs TAN: the real cost of an Italian mortgage

Two numbers, two jobs

The word TAN (tasso annuo nominale) is the market’s name for the contractual interest rate. Neither the Testo unico bancario (TUB, the consolidated banking act) nor the Banca d’Italia’s mortgage guide uses the acronym: the guide speaks of the tasso di interesse, defined as the percentage measure of the remuneration due to the lender for granting the loan. What you pay on top of it depends on the offer.

The TAEG is a legal concept. Art. 120-quinquies TUB defines it as the total cost of credit for the consumer, expressed as an annual percentage of the total amount of credit. The total cost of credit is itself defined as the interest and all other costs, including commissions, taxes and other charges, except notarial costs, that the consumer must pay in connection with the credit contract and that the lender knows about.

So the interest rate answers “what does the money cost?”, while the TAEG answers “what does the loan cost, all charges included?”.

What is inside the TAEG, and what is not

From art. 120-quinquies and the Banca d’Italia glossary, the TAEG covers:

• the interest, and with it the lender’s spread (margin over the reference rate);
• file-opening fees (spese di istruttoria) and instalment-collection charges;
• taxes charged in connection with the loan, such as the substitute tax;
• the premiums of insurance or other accessory services if signing them is a condition for getting the loan or for getting it on the offered terms;
• the cost of valuing the property, if the valuation is necessary to obtain the credit;
• where the law allows, the cost of opening and keeping a current account if you must have one to get the offered terms.

It does not include:

• notary fees;
• costs linked to recording the purchase deed of the property;
• penalties payable if the consumer fails to meet the contract’s obligations.

The consequence is practical. If one lender requires a life policy and another does not, the first lender’s TAEG is higher for that reason alone. And because notary fees are outside it, the TAEG will never tell you your total cash need at signing.

Why the two figures differ

The gap between rate and TAEG is the sum of everything above, spread over the life of the loan. The ECB’s statistics give an order of magnitude for Italy as a whole: in August 2026 the average annualised agreed rate on new house-purchase loans was 3.55% and the APR was 3.99%, a gap of 0.44 percentage points. In July 2026 the two were 3.40% and 3.81%. These are two separate statistical series averaged across all loans, so the gap is indicative of the market, not of any single offer. The APR for August is provisional.

Where you see it, and what to do with it

The law makes the TAEG visible at three moments.

1. General information sheet. The Banca d’Italia says every lender must publish the TAEG on the Foglio contenente le Informazioni generali. If the loan is variable or mixed, the TAEG is shown “merely as an example”, because it can change with the reference rates.
2. The PIES. After you give the lender information on your needs and finances, the lender must give you the Prospetto Informativo Europeo Standardizzato (the European standardised information sheet), the personalised offer document for comparing mortgages (art. 120-novies TUB). The TAEG in it is computed on your case.
3. The binding offer. You have a reflection period of at least seven days to compare offers; during it the offer binds the lender.

Compare TAEGs only across offers with the same amount, the same term and the same rate type. A short comparison checklist:

• Same loan amount and duration in each PIES.
• Same rate type; a fixed-rate TAEG and a variable-rate TAEG are not like for like.
• Whether an insurance policy is assumed in the figure, and whether you could supply your own (see mortgage insurance and life cover).
• Whether a low “entry rate” in the first months is flattering the rate. The Banca d’Italia warns the gap between entry rate and final rate can be substantial.

Where a broker is involved, the fee you owe the broker enters the TAEG computed for the PIES: art. 120-decies says the credit intermediary tells the lender any fee the consumer must pay it, so that the TAEG in the PIES reflects it.

Which professional to consult

A mortgage broker can lay several PIES side by side; ask how the broker is paid before you start. A notary will explain the notary’s charges, which the TAEG leaves out, and an accountant can place the interest deduction (see how much can I borrow) next to the cost.