Mortgage in Israel for foreigners: conditions and requirements

Mortgage in Israel: Stability and Challenges
Mortgage lending for foreigners in Israel

Once upon a time, until 2008, the real estate market in Israel remained stable. However, the 2008 crisis changed the picture. During this difficult time, Israel's Central Bank decisively lowered interest rates on loans, which stimulated construction and increased demand for rental housing. This rise in real estate prices continued until 2016. The gravity of the situation was realized by the Israeli government in 2016. Measures were introduced to prevent a bubble in the real estate market. The record volume of mortgage loans in 2015 caused concern. New taxes and rising interest rates reduced investment excitement. By the end of 2016, loan growth slowed, and in 2017, interest in loans declined further. It turned out that foreign investors also lost interest in buying homes. ### Major banks in Israel: - **Bank Apoalim** - **Bank Leumi** - **Israel Discount Bank** - **Bank Mizrahi Tefahot** - **Bank Beinleumi** Interestingly, foreigners are able to obtain a home loan in Israel even without being present in the country. However, there are restrictions: the maximum loan amount for them is 50% of the value of the object, while for locals this percentage is higher - up to 75%. Deposits and assets in Israeli banks can increase the limit to 60%. Banks in Israel carefully check all the data of borrowers. Monthly payments should not exceed one-third of the client's monthly income.

Structure of mortgage payments

Loan repayment is made through monthly annuity payments, which provides stability for the borrower. Interest rates range from 2% to 4% per annum, but can reach up to 7%, depending on the credit history and the terms of the loan. The longer the loan term, the higher the interest rate.

Features of mortgage loans in Israel

Mortgage loans in Israel have a specific structure prescribed by the country's Central Bank. Typically, the loan body is divided into three parts, each of which is linked to a different financial indicator such as the price index, the dollar exchange rate or a currency basket. This makes the lending rates floating and dependent on changes in the respective indicators.

There is a difference between the mortgage systems of Israel and Europe. In Europe, a single financial indicator, such as the Euribor, is typically used to determine the interest rate on a loan. In Israel, however, each part of the loan has its own anchor, which can lead to fluctuations in the total loan amount over time, despite fixed monthly payments.

Tax implications of mortgage loans abroad

It is important to note that in recent years, repatriates and foreigners have experienced an increase in mortgage costs in Israel. Therefore, it is recommended to regularly monitor updates on interest rates and market conditions.

Additionally, it is important to consider the tax implications related to mortgage loans abroad. In Russia, there is a tax on the material benefit that arises when obtaining a loan at a lower interest rate abroad than within the country.

Conclusion

So, summarizing my research on real estate lending in Israel, I would like to note that the real estate market in this country has gone through significant changes over the past decades. From stagnant prices to their rapid growth, from active lending to the introduction of measures to cool the market - all this is evidence of the dynamic and sometimes unpredictable development of the sector.

Conditions for obtaining a loan

Currency of the loan:Israeli shekel.
Loan amount:up to 50%, in some cases – up to 60% of the property's value.
Mortgage term:up to 30 years old.
Borrower's age:from 18 years old (no upper limit specified).

Interest rates

Interest rates depend on the borrower's individual credit history.

When buying real estate:- Interest rates on programs usually range from 2% to 4%, although in some banks they can reach up to 7% per annum. - The size of interest rates heavily depends on the loan terms: the longer the term, the more...