With the significant increases in property prices over the last 10 years buyers have become increasingly reliant on mortgages to finance their property purchases in Israel. While it is nearly impossible to give hard a fast rules regarding what financing options are available, and what the various banks require, the following is a basic outline of what you need to know regarding mortgages in Israel.
There are a number of options when it comes to structuring your mortgage in Israel. Banks offer fixed rates, variable rate and semi-fixed rate mortgages (e.x. 5 year variable) in both linked to inflation as well as non-linked to inflation. In addition, there are a number of mortgage products available in foreign currency. For a complete list of current interest rates and terms click here: https://www.firstisrael.com/current-interest-rates/
Below are a list of estimated fees which relate to the mortgage:
Bank origination fee: 0.25% of the loan amount (This is capped at 5,000 or 10,000 NIS depending on the lender.)
Appraisal: The cost for an appraisal done after the signing of a purchase contract depends on whether the bank requires a “long” or “short” appraisal. Fees for a short appraisal are charged on a graduated scale based on the purchase price and range from 350 NIS – 1,200 NIS. Long appraisal fees are set by the appraisers and cost 700-1,000 NIS per 1MM NIS in property value. Appraisal done prior to the signing of a purchase contract are charged at the same rates as long appraisals regardless of the purchase price.
Insurance: All of the banks in Israel require property insurance with sufficient coverage to cover the cost to rebuild the property (per the appraisal). Banks also require life insurance coverage for all borrowers, for the sum of the mortgage being applied for, and naming the bank as the beneficiary of the policy. In certain cases, waivers on this requirement can be obtained.
Lien Registrations: In order to record a lien/cautionary note/mishkun in favor of the bank the relevant title offices charge a fee. Depending on the mortgage file, these fees generally ranges from 500 – 1,200 NIS.
Power of Attorney: In the event that the bank is funding a mortgage with a “cautionary note” recorded in their favor in title in lieu of a “mortgage “ (as is the case with purchase loans) the bank will require a POA empowering the bank to complete the mortgage recording process if the borrowers are unable to do so themselves. The cost for this generally ranges from 270 NIS – 450 NIS.
Apostille/Israeli consulate fees: For borrowers who are signing the requisite mortgage documentation outside of Israel there are fees to cover the cost of signing in front of a notary and subsequent apostille of the the notarized documentation or signing at the Israeli consulate.
The bank provides pre-approvals for a mortgage application as a percentage of the purchase price or the appraised value - the lower of the two. For this reason, it is recommended to obtain an appraisal prior to signing the purchase contract.
Pre-approvals are granted based on the information which the borrower provides such as bank statements and income documentation as well as being based on credit checks which the bank does on its own (BDI). Should the details of the borrowers loan application change between the time that a pre-approval is given and the time that the mortgage must fund - the bank may change the terms of the approval. As an example, if the borrowers' income decreased, and they no longer have sufficient income to qualify for the loan, the bank may reduce the loan amount in order to comply with Bank of Israel regulations regarding maximum allowed DTI (debt-to-income ratio).
If you are looking for assistance in navigating the mortgage process in Israel, while securing preferred interest rates and terms, call us today to schedule a complimentary consultation with a First Israel mortgage consultant. We are committed to saving our clients time and money.
First Israel Office: 02-625-2555
Find us on the web at: https://www.firstisrael.com/