Mortgage for Israeli Real Estate

Few potential home owners can purchase an asset without making use of a mortgage for Israeli real estate. In this article, an Israeli real estate attorney will explain what you should pay attention to when applying for such a mortgage.

Mitigating the Risks of Inflation

Banks have created a variety of options to help their clients, all of which consist of some form of a loan + interest. Banks naturally intend to make a profit from their mortgage loans, but as mortgages are generally repaid over decades, most of the more complicated mechanisms at work are intended to make up for the inflation, which is expected to erode the value of the funds over that time.

Types of Loans

For example, a fixed rate, shekel-denominated, CPI-linked mortgage is a NIS-denominated loan in which the interest rate you pay the bank typically increases along with the loan term but is fixed from the day you take the loan. In general, a fixed mortgage is usually repaid at a rate that is known and agreed upon by you and the bank in advance, whereas a floating mortgage’s repayment rates are calculated by the bank on an ongoing basis during the mortgage period. Typically, Israeli mortgage banks fund up to 75% of an apartment value, but anywhere between 50% and 100% may be available, depending on the bank’s confidence in the client and possible guarantees.

Possible Scenarios

In our experience, the more complicated the real estate transaction, the more conditions the bank will likely impose before underwriting a mortgage. Additionally, in some cases, an individual may need to obtain loans from various sources, because the loan the bank provided was not enough. Situations may also exist in which a transaction is relatively simple, but due to a low appraisal value of the property, the bank will underwrite a lesser loan than was initially approved.

Main Takeaway

When considering taking a mortgage, it is advised to speak in-depth with a mortgage bank representative and decide on a mortgage package that most appropriately represents feasibility in your financial picture, bearing in mind that it is often possible to refinance or renegotiate a mortgage in the future.