What are the extra costs when purchasing real estate in Israel?
The following is a list of items you should take into account when calculating a budget for your home in Israel. Some of these expenses will apply to all buyers, while others are only relevant when purchasing new construction, or a pre-owned home. For the Buyitinisrael spreadsheet to help you calculate your expected costs and expenses, send us a message through the contact form.
1. Tax – Purchase Tax (Mas Rechisha) is due within 60 days of signing on a property in Israel. The graduated tax is based on several factors including the price of the home, your status in Israel, the purpose of the property, and whether or not you own additional properties. Click here to use our Mas Rechisha Calculator in English.
2. Legal expenses – Your real estate attorney will charge between 0.5-1.5% plus VAT.
If you buy new construction from a developer you may also be charged legal fees for the developer’s lawyer: a maximum of 0.5% of the purchase price + VAT, or 5,374 NIS + VAT, whichever is lower. In the case of a luxury apartment that costs more than 4,642,750 shekels, the developer’s lawyer can charge more.
3. Commission – Real estate agents in Israel generally charge the buyer 2% + VAT on the purchase price of the property.
4. Money transfers and exchange rates – If using foreign currency to purchase your home in Israel, you will have to convert your currency into Israeli shekels. Expect to pay up to 0.5% incl. VAT for the conversion and assume you will lose out somewhat on the representative exchange rates. Also, the exchange rates may fluctuate between the time of purchase and the date of payments so unless you convert all your funds from the outset, you should bear in mind that you may get less, or if you’re lucky, more, for your currency.
5. Mortgage costs – There are 4 costs associated with your mortgage: 1) Banks charge a fee (which is somewhat negotiable) for taking a mortgage, usually 0.25% but this can go up to 0.5%, as long as it doesn’t exceed 5,000 shekels. 2) When purchasing a pre-owned home the bank may insist on a professional valuation. An appraiser, or shamai, may charge between 2,000 and 4,500 shekels plus VAT. 3) Administrative fees such as notarizing certain documents, granting Power of Attorney, and registration of the loan can amount to a few hundred shekels. 4) If you choose to work with a mortgage broker, the fee will be between 1%-1.25% plus VAT of the loan amount.
6. Inflation – If you purchase new construction from a builder, the purchase price will be linked to either the C.P.I (‘Madad’) or the Construction Cost Index meaning if the index goes up, then any future payments due will increase too.
7. Fees to the builder – when purchasing from a builder there may be some other fees that amount to a few thousand shekels such as a measurements fee and a fee for the preparation of the plans.
8. Engineer – when buying a pre-owned home, it’s advisable to hire an engineer to inspect the property so that you’re fully aware of any issues or problems with the house. Depending on the size of the property and whether the findings will be presented in writing or verbally, the fee is likely to range between 3,000 and 6,000 shekels plus VAT.
9. Utilities – If you are buying a home that has previously been lived in, you will need to transfer the utility bills (arnona, gas, water, electricity) from the seller’s name to your name which will incur a relatively low fee. If you buy from a builder, you should expect to pay for the utility hook-ups and meters, which will be no more than 10,000 shekels, and less if you don’t order a gas meter.
10. Rent – there may be an overlap when you have to pay rent or mortgage payments on your existing home and the mortgage on your new home. Don’t forget to factor this in.
11. Upgrades renovations and furnishings – this refers to renovations, kitchen, bathrooms, air conditioning, wardrobes, furnishings, and furniture, the list is endless… there’s no amount we can attribute to this item, it depends on your need, budget, and style.
12. Moving costs – these can range between 4,000 and 15,000 depending on how far you are moving and the volume of your belongings.
For more details on the extra costs when purchasing a home in Israel read here.
This guide is intended to provide the reader with general information and not to serve as legal or other professional advice. Readers are advised to obtain advice from qualified professionals before entering into any real estate transaction.
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