Mortgage Overview
A plain-English look at how mortgages actually work in Israel, from getting approved before you sign, to how banks qualify you, your options, the costs to watch for, and what you can expect to pay each month.
The Process
It is strongly advised to get approved for a mortgage before signing a purchase contract.
In Israel, a signed purchase contract is final
Unlike other countries where a home purchase can be “conditional upon financing,” a purchase contract for a property in Israel is considered final once it is signed.
It is also important to note that a bank will approve a borrower based on a percentage of the appraised value of a property. Appraisers will often undervalue properties. For this reason, it is often recommended to have a property appraised before signing a purchase contract, in order to determine exactly how much money the mortgage bank is willing to lend.
Qualifying for a Mortgage
Lending institutions in Israel generally approve mortgage applications based on a borrower's income. A borrower's assets can contribute to the strength of the application, but income is a much more relevant factor in approving the mortgage.
Cosigners and guarantors (in Israel or abroad) can also be used in the event that the borrower does not have sufficient income on their own.
Mortgage Options
There are a number of mortgage options available. Mortgages can be in shekels, US dollars, and a number of other currencies. Within each currency, there are several mortgage options.
The choice of your mortgage should be carefully customized to match a number of factors, including the currency of your income, budgetary constraints, and risk tolerance. Mortgages are generally available up to a maximum of 30 years.
Fixed Rate or Variable Rate?
There is a wide range of fixed and variable options, each with its own advantages and disadvantages. Borrowers need to be cautious to understand these terms, as they have different definitions than mortgages abroad.
For a deeper breakdown, see Mortgage Tracks Explained.
Prepayment
Some mortgage options in Israel have pre-payment penalties if the borrower wants to either prepay the mortgage or sell the property before the mortgage is paid off. Generally, variable rate mortgages have no pre-payment penalty. Fixed rate mortgages will generally have a smaller penalty if the lock-in period of the interest rate is shorter.
How Much Can I Borrow?
Israeli lending institutions cap how much of a property's price they will finance, based on your situation:
75%
First property
The maximum financing when this is your first property purchase in Israel.
70%
Replacement home
If this is not your first property but you do not own any other property (you are replacing your home).
50%
Second / investment
Financing for a second property or an investment property.
50%
No teudat zehut
Borrowers without an Israeli ID (teudat zehut) are also limited to 50% financing.
How Much Will I Pay Per Month?
The table below shows the approximate monthly payment on a 1,000,000 NIS mortgage over 20, 25, and 30 year terms, at three sample interest rates.
| Term | 3.5% | 5% | 6.5% |
|---|---|---|---|
| 20 years | 5,800 NIS | 6,600 NIS | 7,456 NIS |
| 25 years | 5,006 NIS | 5,846 NIS | 6,752 NIS |
| 30 years | 4,490 NIS | 5,368 NIS | 6,321 NIS |
Illustrative figures for a single fixed-rate loan. Your actual payment depends on your rate, track mix, and term. Run your own numbers.
Get approved before you start looking
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