By Moises Zack, Senior Consultant. First Israel Mortgage
9 Questions Asked and Answered About Mortgages in Israel.
Mortgages in Israel can be complicated at the best of times. The Carona virus has made things even more difficult. Here are some issues that need to be addressed.
1. How much can I borrow to buy my home?
Israeli residents who don’t own a property can borrow up to 75% LTV (loan to value). Investors buying a second home can borrow up to 50% LTV.
Foreign residents can borrow up to 50% LTV.
However, we can provide options for foreign residents to enable them to borrow up to 70% financing.
2. What are the mortgage rates in Israel? How do they vary?
There are many mortgage products available in Israel. Bank of Israel (BOI) has regulations as to which products one can borrow, and that depends on the residency/citizenship of the borrowers.
Today’s rates are at/close to an all time low where a 30 year hybrid NIS loan is ~3.25%.
3. How does my citizenship or residency status affect my mortgage?
As per BOI regulations an Israeli resident or citizen (living abroad) must borrow at least 1/3 of the loan on a completely fixed rate and maximum 1/3 of the loan can be on a variable rate.
Foreign residents are not subject to these regulations and are therefore able to borrow the entirety of the mortgage in a variable rate in a foreign currency.
4. Can I take a mortgage in foreign currency?
Yes, there are foreign currency options available both fixed and variable. As explained above it depends on the residency/citizenship of the borrowers what products they can use.
5. How are mortgages structured?
There are many ways to structure a mortgage in Israel even while following the BOI regulations. Things to consider would be the term and prepayment penalties.
6. How does the debt to income ratio affect my mortgage loan?
One of the BOI regulations states that the DTI ratio can not be exceed that 40%
7. What are the closing costs associated with mortgages in Israel?
The general closing costs are: Purchase tax, lawyers fee, realtor fee, mortgage broker fee.
8. What are the fees I can expect when taking out a mortgage in Israel?
Our mortgage brokerage fee is 1%+VAT of the loan amount (minimum of 18,000 NIS). The bank has an origination fee of 0.25% of the loan amount which is capped at 5,000 NIS or 10,000 NIS depending on the bank. In addition, there are approximately 1,000 nis in smaller fees.
9. What if I’m a new immigrant in Israel? Do I have rights related to mortgages?
Currently there are no attractive mortgages available for new immigrants especially as mortgage rates are close to an all time low.
As of the time of writing this article the Israeli Economy is slowly coming back to work. However Banks, Municipalities and Government offices are far from working at normal capacity. Therefore extra time needs to be allowed for mortgage submission and processing.
Under normal circumstances where it would take 5-7 business days for an approval today I would allow for two weeks. In terms of processing and funding a loan where it was 45-60 days today I suggest allowing 75 days.
Lastly, Bank of Israel is now allowing up to 70% LTV for cash-out on existing properties – not to be used for the purchase of an additional property.
We pray and are hopeful that everything will slowly but safely return to the new normal.
Moises Zack is a senior consultant at First Israel Mortgage.