Mortgages

In Israel FAQ

Below you'll find the answers to the questions we get asked most about applying for mortgages in Israel 

 

*Answers are according to 2021's updated rules and regulations

 

For further questions contact: Moises Zack, Senior Consultant - First Israel Mortgages 
www.firstisrael.com | mzack@firstisrael.com | +972 (0) 54-3971-901

Frequently Asked Questions

How are mortgages in Israel different from mortgages in the USA?


There are many differences between borrowing in Israel and borrowing in the states. First off, in Israel banks discriminate based on age. This results in most banks requiring that the loan fully amortizes by 80-85 years of age. Secondly, the banks in Israel typically require a life insurance policy covering the loan amount for the duration of the loan, whereas in the US that is not required. In spite of this, it is possible to obtain a waiver on this requirement or to assign an existing policy from abroad. Lastly, in Israel, you can mix and match different types of mortgage products and terms which is not the case in the states since your entire mortgage must be on one mortgage product.




How much can I borrow?


It depends on the residency of the borrowers. Bank of Israel’s regulations states that an Israeli resident (not necessarily a citizen) who is purchasing their first property can borrow up to 75% Loan To Value (LTV). A foreign resident can borrow up to 50% LTV. However, there are mortgage products available for foreign residents which allow for LTVs as high as 70% - the last 20% of which can fund immediately after the purchase is completed.




How is my residency determined?


It is purely dependent on how the purchase tax declaration will be made. This is something that your lawyer deals with, so we strongly recommend speaking with your lawyer about this particular subject.




What is the average loan period on a mortgage in Israel?


Mortgages are available up to a 30-year term in Israel. However as mentioned previously, Israeli banks will discriminate based on the age of the borrowers. Banks will typically prefer for the loan to fully amortize by the time the borrowers reach 80-85 years of age. Although there can be exceptions to this rule, it is much harder to attain mortgage loans outside of this standard.




Do I qualify for a mortgage on foreign-based income?


Yes. To qualify for a mortgage in Israel, your monthly mortgage payment cannot be greater than 40% DTI (Debt To Income ratio) of your net monthly income. Although It is much easier for banks to qualify borrowers based on Israeli income, there are banks that are able to qualify borrowers based on foreign income.




What are the mortgage rates in Israel?


There are many different mortgage products in Israel. It is possible to even mix and match different kinds of mortgage products within certain types of criteria. -A foreign resident has the advantage of taking the entire loan on a variable rate, which generally is lower than fixed-rate mortgages. -An Israeli resident must take a minimum of a third of the loan on a fixed rate and as of January 17th, 2021 are permitted to take a maximum of two-thirds of the loan on a variable rate. Interest rates are from 1.0% - 3% on the Euro, Dollar, and NIS adjustable Fixed NIS rates are from 2.5% - 4.5% depending on the term and size of the loan




Do I need to be in Israel to obtain a mortgage?


The entire mortgage process can be executed while abroad. Power of attorney (allowing your representative to sign on the mortgage and bank account when necessary) and all documentation will be sent for original signatures to the borrowers abroad. Power of Attorney will require notarization and apostille. All original documents will be sent back to allow the processing and signing of the mortgage and opening of the bank account.




How long does it take to get approved for a mortgage?


The timeframe for approval depends on the size of the loan and the complexity of the borrower’s income. For loans below 4mm NIS, the average timeframe is 7 business days. For loans above 4mm NIS where a higher credit committee is required approval can take up to 2 weeks.




What do I need to know about life insurance in regards to mortgages?


Generally, the banks require the borrowers to have a life insurance policy covering the loan amount and the term of the loan. There are banks that allow you to assign a foreign policy. Depending on the situation and the ages of the borrowers sometimes a partial waiver or full waiver can be obtained.




Are there mortgage products available other than in Shekel?


Yes. There are numerous currencies one can borrow. However, the structure of the loan must comply with the Bank Of Israel guidelines mentioned above. The main currencies available are USD, GBP, and Euro.




Can one use a foreign co-borrower?


Yes, it is possible to use a foreign co-borrower. This is very common in Israel especially with young couples or students that do not yet earn sufficient income. Additionally, a foreign resident can also use a foreign co-borrower to qualify for a mortgage.




What documentation is required of the borrowers to submit for a mortgage?


-IDs of the borrowers (if non-Israeli two forms of ID) -For foreigners -Last 2 years of personal tax returns. For Israeli’s, if self-employed last year’s personal tax return and an accountant’s letter estimating Net income for the current year. If employed last three months of payslips -Last 3 months of personal checking account (both foreign and Israeli accounts) -For U.S. individuals full credit report and score