Home Loan
Purchasing a property is no small deal! You may be buying a property because you have made Aliyah. Alternatively, you may be acquiring a vacation home, buying an apartment for your child or simply buying a property as an investment.
Most buyers will need to take out a mortgage, and it is very important to understand the different types of mortgages available in Israel. As a foreigner buying a property in Israel, the mortgage will need to be taken out through the Israeli borrowing system,
and it is important to understand how it works.
and it is important to understand how it works.
A mortgage can be taken out for a term of up to thirty years, as long as the lender will be under the age of eighty five at the termination of the loan period.
There are different types of interest rates available, and a loan does not need to be structured entirely from one type of rate. It can be divided into different rates, as long as at least one third of the residential loan is structured with a fixed rate.
When taking a fixed rate mortgage you have the advantage of knowing how much you will be paying until the end of the term, since that interest amount won’t change. However, there can be significant penalties if the lender prepays the mortgage.
Adjustable rate mortgages may also have prepayment penalties but they will be much less than those of fixed rate mortgages. This rate will adjust every 2,5,7 or 10 years based on your preference.
The prime rate can change 8 times a year. Additionally, there are no prepayment penalties associated with the prime rate.
The advantage of adjustable and prime rates is that the interest can decrease during the term of the mortgage unlike the fixed rate which is unchangeable.
The advantage of adjustable and prime rates is that the interest can decrease during the term of the mortgage unlike the fixed rate which is unchangeable.
How much Loan to Value (LTV) is the bank willing to lend you for your mortgage?
In Israel, foreigners can generally get 50% for a residential loan, which is 25% less than the average Israeli citizen. However, in many cases a foreigner may be eligible for a 75% loan as well with the following conditions:
- If you hold an Israeli passport even though you do not live in Israel.
- If you live in Israel for more than one hundred and eighty one days a year, even though you are not a citizen.
- If the property is purchased in the name of a first-degree relative who matches one of the criteria’s mentioned above. You can still be the borrower and secure a 75% loan.
- A commercial loan. See article.
