Mortgages in Israel

Unless you are very rich and have a lot of cash on hand, buying real estate in Israel will almost always involve a mortgage¹.

If you have any other way to finance a real estate purchase, I strongly advise you to do so and thereby save yourself a "small fortune" in interest, banks fees, etc. It is very unlikely that the money you have in the bank will make more money than the interest you will be paying out.

Here is our initial and very general advice concerning mortgages in Israel:

• There are many different banks in Israel. All the "big banks" have a "mortgage bank" as well. But remember, there is no specific advantage in using a "big bank." Lately it is the smaller banks that offer the better deals creating healthy competition. Use that competition! There is nothing wrong in telling Bank B about the offer you received from Bank A. Very often they will meet it! Not everything² in a mortgage is negotiable but the interest rate is always negotiable. Try to get the lowest interest you can. There is always a linkage to the dollar or shekel.
   
• Use a bank branch close to you if possible. Taking out a mortgage is a time-consuming process and the closer the bank is the less time you will waste. We guarantee that before the mortgage is issued, you will need to personally visit the bank several times.
   
• You can ask your bank for any amount of financing—even up to 90% in special cases. Just remember, the more financing you need, the more it will cost you as the interest rates rise according to the percentage you need to borrow.
   
• Taking a mortgage includes additional fees besides those of the bank itself-- lawyer`s fees, taxes and a number of other expenses. Remember that there will be additional expenses so make sure you have the money available—even if it means taking out a higher mortgage.
   
• Please be aware that your bank will most probably try to sell you insurance. Do not be taken in by them. You have no obligation to buy your insurance from the bank where you take out the mortgage. Your best choice is to take out insurance on the mortgage from an insurance company. Most of the time this will be less expensive no matter what the bank tells you.
   
• Banks make mistakes and most can be fixed, but not all of them. Do not be afraid to ask questions, as many as you need.
   
• Your bank is out to make money. It will not "volunteer" any information. You must "dig" for the needed information. Of course it is difficult to dig for information if you don`t know what you are looking for. This is a Catch-22.

Do not despair! Think logically and seek help before deciding. We will be glad to guide you if we can, but the final decision will always be yours.
 

Sincerely,
 

Tzvi Szajnbrum, Attorney at Law

¹    Whereas historically mortgage banks used to give out most Israeli mortgages, there are now other financial institutions which do this as well. Do footwork and check out the different banks for the different rates before making your decision. The differences in costs and amounts will astound you.

²    Lately, the legal requirements are not really negotiable due to possible fraud—especially on loans for new immigrants.