What to Know about Israeli Mortgages

Mortgages in Israel are different than in the US. It is important to understand these issues because certain wrong assumptions can be very costly. So let’s do some Q&A to cover some of the basics.

 

Why is a broker for most people very crucial?

Reason #1: Many Types of Mortgage Combinations

There are many types of mortgages in Israel from fixed rate and variable to adjustable, shekel vs. dollar and mortgages linked to various indexes. In order to come up with the best possible terms for a mortgage most often the mortgage will consist of a combination of loans. Some loans can be paid off without penalty while others not. It is unreasonable to expect the bank to help you with this. Only a shrewd and experienced mortgage broker can master this after discussing with the client his form of current and future income.

 

Reason #2: Different Banks Different Requirements

For example, most banks in Israel will only give mortgages that will be fully paid when the borrower reaches 80 years old. There are exceptions in some banks. There are also credit rating requirements such as active income, foreign resident and other requirements that many banks will not waive as well as other little details that may prevent even financially stable people from obtaining favorable rates or even a mortgage at all. A mortgage broker can set you up with the right bank at the best terms.

 

What documentation does one need to obtain a mortgage?

Generally an applicant needs a three month pay slip, credit score, 1040 for the past two years and a letter from a CPA regarding the current year.

 

When do you apply for a mortgage?

One should get a pre approval from a bank before signing any purchase agreement. This is critical in Israel because once you sign the contract you cannot back out and you will lose your deposit if you are rejected for a mortgage. Pre-approval is no guarantee that you will ultimately get your mortgage but it is 98% guaranteed. Keep in mind that pre-approval takes about a week to obtain.

 

Can my mortgage be used for closing costs?

Israeli bank mortgages do not cover closing costs which must be paid out of pocket. They do offer eight year loans for closing expenses aside from the mortgage.

 

What percentage of the purchase price can I obtain a mortgage for?

An Israeli citizen can take up to 75% of the appraised value while a foreigner can take up to 50%. Keep in mind that the appraised value only includes legal construction and not any extensions that have often been made to the apartment like extra rooms and closed off porches..

If you apply on the basis of imminent aliya make sure you are going to consummate your aliya. There have been cases of people who applied for aliyah and took large mortgages on account of that, only to complicate matters later when their aliya was abandoned.

 

What is the cost of obtaining a mortgage?

Generally the broker takes 1% with a minimum requirement. The bank has a small fee for opening a mortgage file. Additionally the bank will require an appraisal of the property which you will need to pay.

 

For more info and help with your mortgage contact us. We are here to help!