Israeli Mortgages - FAQ
Is it possible for a foreign resident to get a loan in Israel?
Yes. Currently there are a number of banks that offer loans to foreigners. Each of these banks has its own individual products and terms of loan. The rates and service can vary greatly between different lenders.
Is it possible to be pre-approved for a mortgage in Israel?
Yes, and it is also advisable to obtain this pre approval from a bank before purchasing.
Can I get a completely fixed rate mortgage?
Yes. However since a fixed rate mortgage is relatively new to the Israeli mortgage market, not all banks are offering this product. We have been able to secure fixed rates, up to 20 years without a prepayment penalty in a variety of currencies.
What percentage loan can I get on my property?
It is possible to get up to 90% financing for an Israeli. For Foreign residents 80% - 85% is usually the maximum. On luxury properties (approx $350 000 and up) the percentage offered is usually less. If you require higher percentage financing (above 60%) we always suggest getting pre approved and having your property appraised before buying.
How is the percentage calculated? Is it against what I paid for the property or is it calculated against the properties appraised value?
Almost always it is the lower of the two. That means that if you paid $300 000 and the property is appraised for $270 000 your percentage is calculated against the $270 000.
Is the appraised value usually close to the market price?
In most cases yes. However, it is very important to note that the appraisal can be lower. This is due to the fact that most banks are interested in the value of a property if it had to be resold quickly or if the market takes a turn for the worse. Luxury properties are most susceptible to lower than market evaluations. If you are interested in a high percentage finance (over 60%) it is wise to do an appraisal before purchasing so you know where you stand. It is also important to choose an appraiser that is knowledgable about the area you are buying in, especially if prices have changed recently.
Will the bank pay out the mortgage before I have paid my equity?
Most banks require the borrower to put in the majority of their equity before the bank will pay out even a portion of the loan. This is especially true when the property value is on the higher end of the scale or the percentage of financing is high. Usually under these conditions the banks become less flexible paying out until the down payment is fully paid. This is important to keep in mind so as not to run into cash flow problems. We have seen that certain banks are more flexible with this than others and have had success negotiating in this area if necessary.
Do the purchase taxes on the property need to be paid before the bank will pay out the loan?
On properties that are on the higher end of the spectrum this is often requested. We have had success negotiating part payment of taxes if a smaller portion of the mortgage is needed as part payment. However, most often the banks like to see proof of payment of the taxes before paying out the bulk of the loan.
Is it possible to deduct interest charges on the loan from my income tax?
At present it is not possible for an Israeli citizen to deduct interest charges from their personal income tax. There has been talk about this becoming possible in the future. For foreign residents, deducting the interest charges from personal income abroad depends on your local tax laws. It is advisable to check with your personal accountant. It is possible to get a statement in English from most banks detailing the exact costs, which can be submitted to the tax authorities.