If you’re planning to finance your apartment purchase by borrowing money from the bank, you’ll need to know how to navigate the mortgage maze in Israel. Your mission – and you really should accept it -, is to find the best possible mortgage deal with the least amount of headache-causing red tape.
Mortgages for New Immigrants
If you are a new immigrant (oleh) you may be entitled to a mortgage at special interest rates. The best place to get up-to-date information is a mortgage bank. The rules change frequently and you should find out exactly what you are entitled to as an oleh, before you sign a contract to buy an apartment. Remember to bring along your teudat zehut and teudat oleh as proof of your new immigrant status.
Shop Around for Extra Financing
If the oleh mortgage is not sufficient, you can apply for an additional mortgage to make up the amount you need.
The oleh mortgage is subsidized by the Government and the conditions are the same no matter which bank you use. However, any additional mortgage comes from bank funding and conditions may vary between banks. For this reason you would be wise to compare the mortgage conditions at several banks if you need any additional funding.
Check Out Your Mortgage Options
If you’re investigating your mortgage options here’s what you need to do:
- Submit a mortgage request to several banks. You’ll need to fill out an application form and submit bank statements and pay slips for the past three months.
- When your mortgage is approved in principle, ask each bank to explain your mortgage options, including interest rates and monthly payments, etc.
- Compare your mortgage choices. Don’t hesitate go back to the banks and negotiate for an improved offer.
- Choose the bank you would like to use for your mortgage. You can then begin the actual mortgage process by requesting a teudat zachaut (essentially a certificate of entitlement which shows that you qualify as a new immigrant) for the oleh mortgage. It is easier to process all your mortgages at the same bank.
Make sure that you know how long any mortgage offer from a bank is valid. If you don’t process the mortgage within the time limit, you could lose the deal offered by the bank.
Push the Paperwork
After the bank has approved your mortgage application you’ll need to start processing the paperwork in order to actually get the money. The bank will ask you for a copy of your contract and proof of ownership of the apartment. There are forms which you will need to sign in the presence of a lawyer and other forms which require the signature of the seller. Your contract should stipulate that the seller will do everything needed to provide the documentation required for your mortgage.
If you are buying a second hand apartment (and also sometimes in the case of a new apartment), your bank will ask an assessor to value the apartment. If the assessor values the apartment at less than the contract price, your mortgage will be reduced accordingly. It is often a good idea to get the assessment done before you sign the contract. This ensures that your mortgage budget is realistic.
Other Mortgages with Special Rights and Conditions
In addition to the special mortgage for new immigrants, there are other mortgages with special rights attached to them. You may find, for instance, that attractive mortgages are available for property in a particular area. These mortgages, like the oleh mortgages, are given through the banks. Don’t forget to ask about other special mortgages when you are shopping around the various banks.
If you are a foreign resident, you may still be eligible for a mortgage from an Israeli bank. Again, there are many options and you would be wise to shop around for the best mortgage deal for foreign residents.
Mortgage Transfers – Don’t Give Up a Good Deal
Instead of paying off your mortgage when you sell your apartment, you may be able to transfer it to your new home instead. Many, but not all mortgages are transferable. If, for instance, you have a special rights mortgage which is tied to a particular area of the country and you are buying a home in a different area, that particular mortgage may not be transferable or, if it is, you may lose the preferential conditions which apply.
Before you can transfer a mortgage, your bank will ask that you comply with several preconditions. One common requirement is that you have already transferred a certain amount of money to the seller of the apartment you are purchasing. If you know in advance that you will be transferring a mortgage, your real estate lawyer will help you plan your payment schedule to take account of any bank prerequisites.
At the close of the deal, your mortgage will be registered in the land registry at the same time that your rights in the property are registered. If your mortgage is not registered in the land registry for any reason, your bank may impose a fine. It is quite possible that, if the registration of the rights in your name has been delayed, that you are being fined without being aware of it. Your real estate lawyer will be able to check on the status of the registration of your rights in the land registry for you.
It’s Never too Late to Change
If you feel that you chose the wrong mortgage or you see that the conditions offered today are better than those offered to you when you first took your mortgage, you can either renegotiate your mortgage or replace part of it with a mortgage with better conditions. It’s never too late to improve your mortgage conditions.
While it is certainly possible to navigate the mortgage maze on your own, you may find it helpful to consult a professional mortgage broker or your real estate attorney to help you save time and to ensure you understand the small-print details.