Many people are tempted to start their search for the perfect home or investment property by browsing listings. While it can be exciting to explore real estate opportunities, it’s crucial to understand that without first reviewing your mortgage options, you could find yourself disappointed later on.
Why Should You Start With Your Mortgage?
Before you begin searching for properties, the first step should be speaking with a mortgage broker. A professional mortgage broker can help you assess your financial situation and understand what kind of loan you can realistically obtain. For many buyers, this step is a wake-up call that helps align expectations with reality.
Even if you've used online mortgage calculators, these tools often leave out crucial details that can significantly impact your financial outlook. Starting the property search without knowing exactly how much you can afford could lead to disappointment or, even worse, cause you to miss out on your dream property because you weren’t prepared to secure financing in time.
What Documents Do You Need?
To make the mortgage process as smooth as possible, you’ll need to have the following documents ready:
- Copies of ID and appendices (for couples, both partners' IDs)
- Pay slips for the last three months (for self-employed: a profit and loss statement approved by a CPA)
- Bank account statements from the last three months
- Report on any additional loans (if applicable)
- Appraisal report or a document outlining the property’s value
- Notarized power of attorney
- Mortgage insurance policy approval
How Much Mortgage Can You Get in Israel?
In Israel, the amount of mortgage you can receive depends on your residency status:
Israeli Residents
If this is your first property purchase, you may be eligible for a mortgage of up to 75% of the property's value. However, if one of the spouses already owns a property, the mortgage is limited to 50%.
Foreign Residents
Foreign residents typically qualify for a mortgage of up to 50% of the property’s value. In some cases, additional loans may be available, allowing up to 70% financing. Foreign residents can also choose from a variety of mortgage plans, including loans in foreign currencies, although these are limited to one-third of the total mortgage.
Should You Put Down a Larger Down Payment?
While many buyers aim to put down the smallest possible amount, it’s important to consider that this may not always be the best strategy. The higher your down payment, the lower your loan amount, and the less interest you will pay over time. Additionally, a larger down payment makes you a lower risk in the eyes of the bank, which may result in better interest rates.
Additional Costs to Consider When Buying Property in Israel
Beyond the mortgage itself, there are several additional costs involved in purchasing property in Israel. Some of these are one-time costs, but they can significantly impact your budget:
- Purchase Tax: This is calculated based on the number of properties you own, with first-time buyers paying a lower rate.
- Broker Fees: Real estate agents typically charge between 2%-3%, but negotiation is often possible, potentially saving you thousands.
- Attorney Fees: A lawyer is essential to ensure that the property is properly registered under the seller’s name and that all documentation is accurate.
- Appraisal Fees: Appraisers assess the property’s value and submit a report to the bank, if necessary.
- Registration Fees: There are several small fees (usually less than 200 NIS each) for registering the property under your name in the land registry.
- Transfer Fees: Foreign residents may encounter fees related to transferring money from abroad into an Israeli bank account.
Key Differences Between Mortgages in Israel and the US
Most mortgage information available online is based on the US market, but there are key differences between the mortgage processes in Israel and the US:
- Self-Managed Process: In Israel, the borrower is responsible for many aspects of the mortgage process, such as title searches and appraisals, whereas in the US, the lender typically handles these tasks.
- Loan-to-Value Restrictions: In the US, it’s possible to finance up to 100% of a property’s value, though this is rare. In Israel, mortgage amounts are capped at 50%-75%, depending on your residency status.
- Inflation-Linked Fixed Rates: Fixed-rate loans in Israel are often linked to inflation, which can increase your monthly payments over time.
Why Work With an English-Speaking Mortgage Broker in Israel?
Navigating the Israeli mortgage market can be complex, especially for foreign residents. An English-speaking mortgage broker can help you in the following ways:
- Save Time: A professional mortgage broker is familiar with the process and knows how to manage the necessary paperwork and communications with the bank.
- Save Money: The difference between a well-negotiated mortgage and one without a broker's expertise can amount to tens of thousands of shekels over the life of the loan.
- Local Expertise: A broker who understands the nuances of the Israeli mortgage system can guide you toward the best financial decisions.
Get started today with professional mortgage advice for purchasing property in Israel. Call now: +972 52-6763416
