How much of a mortgage can I take in Israel?
Posted on 04. Feb, 2010 by buyitinisrael in Mortgages, The Official Guide
©iStockphoto.com/Hernan Anton
By Avner Buntman
The response to this question is twofold and can best be answered by asking two further questions:
1. How much can you afford to pay back each month?
When buying a home in Israel, in order to obtain a loan from a local bank, a potential borrower needs to show the bank that they have the capacity to repay the loan from their current income. Israeli banks almost always require income verification even if the percentage of financing is relatively low. As a general rule the banks in Israel require monthly income to be three times the monthly mortgage payments. For example, if your mortgage payments are 4,000 NIS per month the bank will want to see that you have (gross) income of 12,000 NIS per month. There is some flexibility on this rule, especially if a client can show other savings or assets. In most cases the banks will want to see a client’s current income; including their most recent pay slips, bank statements and ID documentation. For a foreign resident, the past two years tax returns, credit history, and a letter from an accountant will usually suffice.
2. What is the value of the property you are buying?
Most banks will lend up to 70% of the value of a property, and sometimes higher if you have zakayut (points) through Aliya. It is possible to get an even higher loan to value (LTV), up to 95%, using a third party mortgage insurance company (E.M.I). This insurance is applied for through the banks and comes at an additional cost to the actual loan.
The first step in the mortgage process in Israel – Getting pre-approved
The first step in taking a home loan in Israel is obtaining a letter of pre-approval (ishur). Pre-approval letters can be prepared even before you’ve picked out your home, based on what you can afford. With a pre-approval letter in hand, buyers know exactly how much they can borrow — and therefore how much house they can afford. This puts the buyer in a stronger position to make an offer, negotiate and close on a property. Pre-approvals are valid for 3 months and can be easily extended if you do not find a property immediately. If you are starting to look to buy a home, the first step should always be to get pre-approved for a loan.
© Copyright 2010
The writer is the Founder and CEO of Mortgage Israel, a private mortgage consulting firm in Israel. He can be reached by telephone at +972 2624-0299 or by email at abuntman@mortgageisrael.com.
The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.
