Even though Israel is a small country, many people around the world choose to invest here every year. Additionally, the percentage of foreign immigration to Israel is increasing. However, when a foreigner purchases real estate in Israel, the mortgage process is sometimes difficult, cumbersome and requires dealing with lengthy bureaucracy.
There are two types of non-residents from the perspective of the banks: Israelis who live abroad and have held onto their Israeli citizenship, or a foreign resident who does not hold Israeli citizenship and wants to purchase property in Israel. The main difference between the two is the percentage of financing and the interest rates. While a resident with Israeli citizenship can receive up to 70% financing (of the value of the property) from the bank, a foreign resident who does not have citizenship can receive up to 50% financing. The same differences apply to interest rates. The percentage of interest received by citizenship holders is lower than non-citizenship holders, with the differences ranging between 0.2% -0.7% in interest rates.
It is important to mention that the bank takes a risk when it comes to foreign residents, because they do not have access to their credit history abroad and are unsure if they will be able to reach the customer in the event of a problem with the payments. Foreign residents should consider using external and objective mortgage advice to represent you at the bank.
There are four major and four minor banks in Israel, and you should check them all to receive the best rates!
To begin the process of obtaining a mortgage, you need to prepare some documents, such as ID/passport, details of existing bank accounts, the last three pay slips (if employed), and tax assessment (if self-employed or retired).
How to combine an optimal mortgage?
There are many options in choosing mortgage, for example, between a fixed interest or variable interest. In both cases, you can also choose whether it’s linked to the Consumer Price Index (CPI) or not.
The rules of Bank of Israel mandate that a minimum of 1/3 of the mortgage total be placed in a fixed interest track (regardless of the choice between CPI-linked or not). The interest rate linked to the CPI is lower than the rate that is not linked, but there is a higher risk for frequent changes in the monthly repayments.
Another component in the mortgage is the 'prime' interest rate. The 'prime' interest is based on the Bank of Israel’s interest rate. Today, the Bank of Israel interest rate is 0.25%, and is reviewed every two months. The 'prime' rate is combination of the Bank of Israel’s current interest rate plus a fixed interval of 1.5%, so the 'prime' rate as of early 2019 is 1.75%.
The Israeli banks will give you a prime rate mortgage, minus 0.1% - 0.7%, making the annual interest rate around 1% - 1.7% -- this is the lowest rate compared to other options in the mortgage market!
In conclusion, while the banks are making it difficult to obtain a mortgage and are helping sustain a long and complex bureaucracy, they also want you to take loans from them, especially if you are a good customer. We will help you to present your financial portfolio in the best way possible, so as to pay as little as possible!
Karin Armel Daniel Nachmias
Chairman DNA mortgage Ceo DNA mortgage
+972 – 077 – 466 - 1370