Buying a Home in Israelthe English guide

The Five Elements of an Israeli Mortgage


There are two main different types of mortgages; housing and all purpose. 

Housing Mortgage

The most popular type is a housing mortgage. These are the best rates a person can get, up to 30 years. The mortgage itself can consist of different loans, with each loan for a varying length of time, and is relevant for the following loans:

  • Purchasing a home from a contractor (kablan)

  • Purchasing a second-hand home

  • Building your own home, including the land

  • Expanding one’s current home (with legal building permit)

The maximum financing percentage for these types of loans are between 50%-75%.

All-Purpose Mortgage

Similar to a home-equity loan in America, this is when you mortgage your existing home.  Unlike the housing mortgages, here the money is transferred directly to the borrower’s account (unlike in a housing mortgage where the funds are transferred to the seller). Lengths of the loans vary depending on the bank and can be up to between 20-25 years. These loans have higher rates than housing loans and usually are for smaller amounts. This is relevant for:

  • Refinancing bank loans

  • Loans for down payments for childrens’ homes

  • Paying for weddings

  • Renovations

  • Vacations

  • Purchasing real estate overseas

  • Not for business loan purposes

The maximum financing percentage for these types of loans is 50%.

Percentage Breakdown

-First-Time Homebuyer: Up to 75% financing.

-Alternative Homebuyer (a homeowner in transition, selling his first home to buy a second: Up to 70% financing.

-Second Home (in Israel): Up to 50% financing.

-Buying as a Foreigner: Up to 50% financing.


Property Type

There are different kinds of homes that you might decide to buy in Israel, and each one has its own specific rules regarding the kind of mortgage that you can get. 


Firsthand (or יד ראשונה) homes are brand new. They come to you directly from the contractor or developer that was responsible for building them. 


Secondhand (יד שנייה) homes are any homes that are not firsthand. For the purposes of mortgages, secondhand means that you are buying a home from the previous homeowner. 

Over the Green-Line

When buying over the Green Line, people should be aware that many homes have different legal status and as such the banks treat them differently, often resulting in less than favorable terms including higher interest rates and many times require higher down payments


Mortgages in Israel are usually comprised of a mix of three loans; fixed, floating and prime.

Fixed-Rate Loan (non-CPI linked)

  • Considered to be the most expensive and safest loan.

  • The monthly payment does not change throughout the course of the entire loan.

  • Good for risk-averse investors.

  • One can take between 0%-100% of the mortgage loan at this type.

Fixed-Rate (CPI linked)

  • The rate itself is fixed, but the principal is linked to the consumer price index and can increase or decrease, depending on the CPI (inflation).

  • For people just starting off looking for lower monthly payments, expecting to refinance in the future with higher income and higher monthly payment.

  • Used for shorter loan periods, if inflation isn’t high.

  • Can be dangerous over the course of 20-30 years as the principal could grow substantially over a long period of time, making the monthly payments very high.

  • Can involve high early repayment cancelation fees.

5-Year Floating Rate (non-CPI linked)

  • A combination of a fixed unchanging rate and a variable rate loan. The loan is fixed and readjusted every five years, according to a known reference point that is not dependent on the bank (usually a 5-year government bond anchor – like Shahar).

  • Considered to be more expensive, but relatively safe as the monthly payments don’t change until the rate is updated.

  • When the rate updates (every 5 years), an option exists for early repayment (anywhere between 10%-100%) without penalties.

  • Can comprise up to two-thirds of the mortgage loan.

5-Year Floating Rate (CPI linked)

  • Similar to the non-CPI linked, the rates update every 5 years, as it is linked to inflation the principal can go up or down depending on the CPI inflation rate.

  • Benefits include dramatically lower rates as compared to the fixed, though it involves a high risk as the monthly payments can grow.

  • Good for those who believe they will be able to pay off a portion of the principal throughout the loan period.

  • Currently a more popular choice among mortgage borrowers as the difference between the linked and non-linked is high.

Prime Loan

  • This loan is completely variable and set by the Bank of Israel. It can change up to eight times a year, though usually the rate doesn’t fluctuate that often (especially in the last decade). Currently it’s at its all time low, and is expected to go up with time.

  • Used as the base loan for all mortgages in Israel, 1.5% above the Israeli market rate.

  • Currently the lowest rate available, though it carries the highest risk.

  • Carries no early repayment fees as long as one notifies the bank, minus a 60 shekel bank service fee.

  • Due to the possible volatility of this loan, the Bank of Israel (BOI) previously limited the amount to up to one-third of the loan. However, due to the pressure on the BOI regarding the fact that the prime rate has been historically low with barely any volatility for the past decade, now one can finance a mortgage with a loan of this type of up to two-thirds; though the rate does increase for the second third.


  • A loan which changes every 3, 6 or 9 months as based on the LIBOR rate.

  • Considered high risk and not a good loan option.

  • Used for borrowers who hold foreign currency.

  • Available in dollars and euros, though the monthly payment must ultimately be made in shekels.

  • Foreigners are able to take up to 100% financing of the mortgage using a LIBOR-based loan and Israelis 50%.

Loan Term

  • 1-30 years (until the age of 75-80, bank depending)

  • Mortgages require mandatory life and homeowners’ insurance. 

  • One has an option to use the bank’s insurance providers or insurance can be acquired independently via local insurance companies.

Join Our Monthly Newsletter

Subscribe to our monthly newsletter and stay informed on updates in the Israeli mortgage industry.

ContactUs Today!