Buying a Home in Israelthe English guide
Preparing to Buy a Home in Israel
Buying a house in Israel is a serious commitment, so before you start looking for a house, take the time to examine your situation and how it could change in the future. Ask yourself:
- Are you planning on any major life changes, like changing jobs or moving communities in the next few years, that could impact your financial situation?
- Can you commit to staying in a home (and community) for at least five years?
- Do you have a stable income?
- Are you confident you can handle house repairs (or can take the time to learn)? Have you budgeted and/or are you willing to pay a repairman when something breaks?
All of these are important to take into consideration when you are thinking of buying a home in Israel. If you are ready, then let’s move on.
Dealing With Banks
All major banks in Israel are able to provide mortgage loans. If you plan on dealing with the banks yourself (i.e. without a mortgage broker) then you need to call up your bank’s customer service line and schedule an appointment with a mortgage advisor (יועץ משכנתאות). NOTE: There is a crucial difference between mortgage brokers in the US and those in Israel. In the US, brokers collect their fee from the bank. In Israel, however, the broker gets paid by the homebuyer. This is enormously beneficial to the buyer for one important reason; it means that the broker is in your corner, motivated to make sure the bank gives you the best rates and loan terms. In Israel, brokers are the friends of the buyer.
The Israeli Housing Ministry (along with other relevant government bodies) has strong regulations over mortgage loans. However, banks often interpret laws slightly differently and so, can have variations in their operating procedures. This can result in small, but substantial, differences in financing, rates provided, as well as other general advantages and disadvantages of each bank, depending on the loan and circumstances.
First time homebuyers in Israel are eligible for maximum 75% financing, though banks often prefer to approve only up to 70%. In addition, there are multiple tax exemptions and benefits for first time buyers (link to article).
Buying in Israel as a Foreigner
Foreigners are only able to receive 50% financing when buying property in Israel. There are other options available, depending on the bank, to qualify for an additional 20%, such as additional loans from the mortgage-lending bank or other banks, to help provide the ideal principal amount. The tax burden on foreigners buying a home in Israel is similar to that of an Israeli purchasing a second property. Regarding the mortgage procedure, certain banks allow the borrowers to complete the entire process from overseas through a lawyer or close family member’s power of attorneys; though the majority of the banks require physical in-person verification. Doing the process from overseas can be limiting and can result in losing out on the better deals available if the process is done locally.
Commercial Real-Estate & Business Mortgages
Depending on the bank, borrowers can receive between 60%-70% financing. The length of the loan period is shorter than a standard mortgage; ranging between 15 to 25 years. US LLCs find this to be a lucrative option and they can qualify for 70%. Please take into account that the tax rates are different from a regular home mortgage and it is advisable to consult with a lawyer or accountant on the matter.
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