What are the extra costs when purchasing real estate in Israel?

The following is a list of items you should consider when calculating a budget for your home in Israel. Some of these expenses apply to all buyers, while others are only relevant when purchasing new construction or a pre-owned home.

1. Tax – Purchase Tax (Mas Rechisha) is due within 60 days of signing on a property in Israel. This graduated tax is based on factors such as the price of the property, residency status, purpose, and whether you own additional properties. When purchasing new construction, Mas Rechisha is calculated based on the total value of the transaction, including VAT, and payment can be deferred until 50% of the purchase price is paid, though interest and inflation will apply. Use our Mas Rechisha Calculator in English to calculate how much is due.

2. Legal expenses – Your real estate attorney will charge 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 5,770.77 NIS + VAT, whichever is lower. The developer’s lawyer can charge more for a luxury apartment that costs more than 4,642,750 shekels.

3. Commission – Real estate agents in Israel generally charge the buyer 2% + VAT on the property’s purchase price.

4. Money Transfers and Exchange Rates – If you purchase a home in Israel using foreign currency, you must convert it into Israeli shekels. Conversion fees, including VAT, can be up to 0.5%, and the rates offered are typically less favorable than the official representative exchange rates. Additionally, exchange rates may fluctuate between the time you agree to purchase the property and the dates of subsequent payments. Unless you convert the entire amount upfront, you should account for the possibility of receiving less—or, if fortunate, more—for your currency due to these fluctuations.

5. Mortgage costs – Four costs are associated with obtaining a mortgage in Israel:

1. Bank Fees: Banks charge a standard fee of 360 NIS for processing a mortgage application.
2. Property Valuation: When purchasing a pre-owned home, the bank may require a professional valuation by an appraiser (shamai). Fees for this service typically range from 1,000 to 6,000 NIS, plus VAT.
3. Administrative Fees: Additional costs for notarizing documents, granting Power of Attorney, and registering the loan can add up to a few hundred shekels.
4. Mortgage Broker Fees: If you choose to work with a mortgage broker, expect to pay a fee of 1%–1.25% of the loan amount, plus VAT.

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 preparing the plans.

8. Engineer – Hiring an engineer to inspect the property you’re purchasing is highly recommended to ensure you’re fully aware of any potential issues or defects. Inspection of pre-owned homes should be conducted before signing the purchase agreement. For new construction, the inspection is typically done before taking possession. The cost of the inspection, depending on the property size and whether the findings are provided verbally or in a written report, generally ranges from 3,000 to 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 developer, 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 can range between 4,000 and 15,000 shekels depending on how far you are moving and the volume of your belongings.

Read here for more details on the extra costs when purchasing a home in Israel.