Tzvi Gleiberman, Senior Mortgage Broker

When purchasing a home, beyond the down payment and mortgage, there are one-time closing costs that add up quickly.

Here’s my breakdown of what I typically see closing costs are, divided into mandatory and optional (but recommended) costs.

Mandatory Costs:

– Purchase Tax: Varies based on property value and status (Oleh, first-time buyer, etc.)

– Home Value Appraisal for Mortgage Purposes: Pre-Purchase ~4,000 NIS Post-Purchase ~1,200 – 2,500 NIS

– Builder’s Lawyer (for new construction purchases only): ~6,500 NIS

– Your Lawyer: ~0.5% – 1% of purchase price

– Bank Fees when opening a mortgage file: ~1,000 NIS

Optional but Recommended Costs:

– Real Estate Agent: ~2% of purchase price

– Mortgage Broker: ~1% of mortgage amount

– Structural Engineer: ~3,000 NIS

Sample Closing Costs: A first-time home buyer, buying a 2.2 million shekel apartment from their neighbor, will have closing costs that should be less than 5% of the apartment price.

Regarding the optional but recommended services, here is why I recommend them:

Mortgage Broker: Different lenders have different requirements, and how, and to whom, your financial story is presented to the bank impacts approval and loan terms. A mortgage broker with daily experience navigating these complexities helps you prepare the right documents and deals directly with the bank on your behalf. They also directly coordinate the legal paperwork, home and life insurance, appraisals etc., streamlining the process and increasing the chances of securing the best possible terms. The right broker can mean better rates, a faster process, and less stress.

Real Estate Agent: A real estate agent helps you find a home that fits your needs and budget. A good agent understands pricing trends, neighborhood dynamics – including religious, schooling, shopping, public transportation, future development plans etc. They handle negotiations and coordinate viewings, serving as the bridge between the buyer and seller.

Structural Engineer: I recommend a structural engineer when buying older secondhand homes in Israel where hidden structural problems can lead to costly repairs down the line. Structural engineers create a report for you that assesses the building’s foundation, structure, and overall condition, identifying potential issues such as cracks, settling, or outdated materials that may need repair.

Bottom Line: Unlike in other countries, closing costs in Israel cannot be included in the mortgage – they must be paid at signing or soon after. If you don’t plan ahead for them, it can put unexpected pressure on your finances. Factoring them in from the start helps you budget your home purchase properly.

Authors Disclaimer: The numbers above are approximates based on what I see every day as a broker and can vary based on each unique situation.

Over 20% of mortgages in Israel in 2024 was done through a Halva’at Kablan.

But what is a Halva’at Kablan and how can it help me?

For many homebuyers in Israel, purchasing a new apartment on paper—before construction is completed—is an attractive option. It allows buyers to lock in today’s prices and benefit from appreciation by the time they move in. However, it also presents a major financial challenge: buyers must secure a large initial down payment, and continue to pay rent on their current place of living, all while making mortgage payments on a property that isn’t yet built. This is where Halva’at Kablan, or the Builder’s Loan, comes in.

This financing model addresses both issues – providing the builder with funds to complete the project while easing the financial burden on the buyer during construction.

But what is Halva’at Kablan? Unlike a conventional mortgage, where the bank transfers a lump sum to the seller to purchase a completed property, a Builder’s Loan is structured to fund a home under construction. It involves three key players who sign a 3-way contract:

• The Buyer who gets pre-approved by a bank and makes an initial down payment to the developer.
• The Bank who issues funds in stages directly to the builder, based on construction milestones.
• The Builder (Kablan) who oversees construction and covers the interest payments on the loan until the project is completed (or a specific date).

While Halva’at Kablan offers lower upfront costs and financing flexibility, it also comes with risks that buyers must consider.

One concern is mortgage eligibility upon project completion. Pre-approval for a Builder’s Loan does not guarantee final mortgage approval, as banks reassess a buyer’s financial situation before converting the builders loan to a mortgage. To avoid issues, buyers should maintain a stable income, manage their debt wisely, and refrain from taking on new financial obligations that could impact their approval.

Another key risk is the potential for increased costs. If interest rates rise between the initial loan approval and final mortgage conversion, monthly payments could be significantly higher. Additionally, many builder contracts are linked to the Madad (Israeli Consumer Price Index), meaning the final purchase price may increase with inflation.

Since each Halva’at Kablan agreement differs, buyers must carefully review the terms. It is essential to clarify who covers interest payments during construction, if the price is linked to the Madad and how the bank handles mortgage conversion. Given the complexities involved, consulting a professional prior to signing is highly recommended to ensure you secure the best possible terms.