Mortgages

Have you just made Aliyah and wish to apply for a mortgage in Israel? Here is some information you will need to know about mortgages in Israel, and help you understand how the mortgage system works. Acquiring a mortgage for a residential property in Israel is a crucial step toward purchasing your home. Olim who have either finished the process of becoming Israeli citizens or are entitled to become Israeli citizens are entitled to up to 75% LTV (loan to value) instead of 50% as foreign citizens. Also, as a new immigrant, you may be entitled to a purchase tax reduction.

Israelis living abroad and foreign residents who wish to purchase a house in Israel must pay an 8% tax, subject to government policy, meaning it can fluctuate. The maximum finance rate for a mortgage in Israel for homebuyers who have no other properties in Israel can get up to a 75% finance rate for their first purchase. If this is the case for housing improvements, the maximum finance possible is 70%, and if you already have a property in Israel, the maximum finance rate will be 50%. Olim are also entitled to a loan of up to two hundred thousand shekels as part of their Mortgage. This loan, given by the Ministry of Housing, is for up to 30 years, and the interest rates might be lower than a mortgage given by the banks. You may utilize all the state benefits as part of your mortgage, but you must have the necessary documents for this state loan.

As with all citizens, homebuyers must provide proof of a monthly income either generated in Israel or abroad; this includes investment income as a threshold requirement for a mortgage. Your repayment capacity is calculated according to your monthly income, regardless of personal wealth or existing property. The bank calculates your repayment capacity according to your monthly net income. The Bank of Israel limits the debt-to-income ratio to 40%. For example, if you and your spouse have a joint net income of 10,000 shekels, your monthly payment should not exceed 4,000 shekels per month.

Israeli banks offer their clients various mortgage options to create an appropriate combination for each client. The most popular option is a loan linked to the prime rate; if the interest rates are low, this is a great option, as it is limited to 66%, two-thirds of the total amount, of the loan. A minimum of one-third of the mortgage must be set at a fixed rate. Good Mortgage advisors, whom we highly recommend that you employ, will present you with the various structure options and underline all consequences so that you can choose the proper structure for you.

The length of the mortgage process depends on two steps: the first being before signing the purchase contract, which includes applying for approval in principle for your application by presenting all relevant income documentation. After signing the contract, you will proceed to step two, signing all mortgage and collateral documents, and there are many to place a deed. Once the mortgage file has been checked and fully completed, the funds will be wired. We strongly recommend signing the purchase contract only after receiving final approval and hiring a lawyer to advise and escort you through all the steps of purchasing the property and obtaining the Mortgage. Your mortgage adviser will do the entire mortgage process for you, starting with applying, presenting the necessary documents, and getting the approvals.

Your mortgage adviser will do all the research for you in all the banks to apply for the best mortgage deal; they are experienced in leading you through the process smoothly and confidently. Your lawyer will also be accompanying you through the transaction for the entire process.

Most mortgage departments include experienced specialists who provide services in as many languages as possible since Israel has now become a multi-language society, and most government organizations have become more sensitive to the unique needs of Olim.

• Please do not sign on any property before receiving an “approval in principle” for a mortgage from your bank.
• Ensure that your lawyer has approved all legal issues regarding the property involved, including ownership of the seller, and correct and complete property registration.
• If you have funds abroad from which you plan to purchase the property, please ensure you wire these funds before signing the purchase contract.
• The banks in Israel are legally obligated to check the origins of your funds and monthly income. Make sure you have all relevant documentation.
• Make sure you have a lawyer who understands your language; Israeli lawyers are excellent because they have much experience in Israeli law and advising Olim in the mortgage process.
• Life insurance is a preliminary requirement for your mortgage approval; the banks will set you up with a broker when you sign the contract.
• For a referral to a reliable Mortgage counselor, we highly recommend Assaf Persi Mortgages and Loans; for more Counselors, contact us, and we will find one in the area you will be purchasing.