Guide: Buying a home in Tel Aviv

Buying a property in Israel has its unique challenges and differences compared to other countries. It’s crucial to understand the various fees, how mortgages are calculated, and what to consider when purchasing a home in Tel Aviv.
Read through our ultimate guide on buying a home in Israel below.

Buyers

Fees & Expenses

When buying a property in Israel it is important to understand that, unlike in some other countries, in Israel the purchase price of the property is 100% paid to the seller; all other additional fees have to be added on-top of that purchase price. Some of the fees are a direct correlation to the purchase price where others are fixed and depend on the service provider.

Tax, Agent & Lawyer Fees

Purchase Tax – There are different rates which are progressive. In order to understand the complexities involved as to purchase tax, please go to our Tax Calculator Page.

Agent Fees is 2% of purchase price + VAT; the fee goes directly to your agent representing you in the process. The other agent represented by the owner is paid separately by the owner.

Lawyer Fees depends on your choice of attorney. The fee can be anything between 0.5%-2% of purchase price + VAT. The price depends on the size of the firm and the type and duration of the deal – construction, 2nd hand, land, future rights. It is highly suggested to ask your real estate agent to recommend the correct lawyer for your deal.

Other Expenses

Make sure to consult with your real estate agent before committing to any expenses.

Appraiser Fee

Not always necessary when you work with a professional real estate agent, but if you do need one, it should cost between 6K to 12K NIS.

Home Inspection

Again, not always necessary, but sometimes extremely necessary. Home inspection should cost between 8K to 16K NIS depending on the size of the property.

Contractor

If you are buying a secondhand apartment, you will most likely receive it as is. There may be a need to bring in a contractor for painting or for additional minimal renovations. These prices vary greatly according to what needs to be done.

Mortgage Consultant

When you use the bank’s mortgage consultants its “free” of charge. But remember the bank’s consultants work for the bank. We suggest a private mortgage consultant which looks out for you needs and personal benefits. This should cost between 8K to 15K NIS, but will likely save you a lot more than that on your mortgage.

Kitchen Appliances & Light Fixtures

This can be mind blowing for some of you, but in Israel an apartment is sold empty. Meaning you literally only buy the location, size, and number of rooms. If you agree with the seller that anything such as kitchen appliances or light fixtures or even AC units stay you must have that covered in the contract. And if not, take these items into account when planning your budget.

ISRAEL

Mortgages FAQ

Your questions answered

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

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

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.
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 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

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.

Purchase

TAX Calculator

When buying a property in Israel, you will have to pay a purchase tax to the government with no exemptions. There are different rates which are progressive, and you must take this extra cost in consideration when planning your budget of buying a property in Israel.

*Oleh benefits are applicable to new Olim within the first seven years of making Aliyah. Olim have a choice of using this or to pay according to the Israeli 1st apartment tax brackets.

BUYERS

Your Checklist

If you are purchasing a property in Israel to live in either year round or as a vacation home, we highly recommend preparing a checklist of your property requirements. Browse through these questions to go over with your agent, or watch the video to be guided through the important considerations.
Purpose of Purchase

Who is this property for? Who will use it? Newlyweds, family with kids or retired couple?

Number of Bathrooms
And indicate if you need a bathtub.
Balcony
And also the size of the balcony.
Goal Month to Purchase
Is there a specific date that money is released from inheritance or from selling a property? Is there a goal to purchase so other adjustments can be made before move-in date?
Location

It’s best to decide on a specific neighborhood, and easiest to mark on a map a border line with streets. First research the neighborhood to make sure it suits your needs: schools, parks, medical centers, even dog parks.

Street
Is main street okay? Quiet street? It’s also important to specify if you prefer the apartment to be rear facing or front facing to the street.
Elevator
Even if the answer is no, maybe you do require an elevator if the apartment is on the 3rd floor and up, for example.
Budget
Understand all the additional fees and then determine your budget.
Renovation
Would you prefer a shell apartment: an essentially empty, completely unrenovated apartment that allows you to design the place yourself.
Parking Spot
And the type of parking spot that you prefer not to deal with – for example an elevator parking entrance.
Number of Bedrooms
And also consider the size of bedrooms if important. New buildings tend to build small bedrooms, while old buildings usually have more spacious bedrooms.
Floor
Sometimes it’s important to decide which floor isn’t relevant. Some people don’t like garden apartments, others don’t want to be on the top floor.
Goal Date to Move in By
Did you sell and have a move out date? Do you have an aliya date? Are you expecting a baby and want to move in before?
Goal Month to Purchase
Is there a specific date that money is released from inheritance or from selling a property? Is there a goal to purchase so other adjustments can be made before move-in date?

We’re changing real estate service standards in Tel Aviv and have your back with the entire purchasing process. Let us know what is important to you in a home or property today

We’re here for you

Purchasing a home in Israel is one of the most important decisions you’ll make, and the right advice and guidance is paramount. By working with us, you’ll understand every step of the purchase process in your language, so there’s no room for translation errors or dishonest dealings.

We will listen to your needs, find you the perfect home, and make sure that you make an educated and informed decision. Once you choose a property, we will represent your interests vociferously throughout the purchase process, negotiating the best possible purchase price and payment plan. We will also connect you to our network of lawyers, mortgage consultants, currency transfer, architects, and more to help you make your dream home a reality.

Contact us to discuss your real estate needs today