Closing Costs on Buying a Home in Israel
Updated January 2022
You are seriously considering buying a home in Israel.
Aside from the obvious expenses such as furniture and appliances, there are various fees that are associated with purchasing property in Israel.
These major costs and fees should be thought about ahead of time in order to budget properly and avoid running into issues later down the road.
Purchase Tax: Mas Rekhisha
The main fee is called Purchase Tax ("Mas Rekhisha").
Up through November 2021, in an effort to strengthen the economy from the COVID pandemic, the rate had been lowered, starting at 5% and varying depending on the price of the property.
The fee has been changed and is now based on residency in an effort to prevent people from making aliyah and then returning right back to their country of origin.
Investors and foreigners in Israel need to pay a Purchase Tax starting at 8% when purchasing a home
The Broker's Fee
Another fee is that of the real estate broker you work with.
The broker’s role is to relay expert information and their understanding of the market to their clients, present viable options available to them, and negotiate on their behalf in order to get the best deal possible.
In Israel, both the seller and the buyer pay the broker’s fee, which is payable upon signing a contract.
The Broker’s Fee is 2% + Ma’am (like GST) (17% of the 2%).
The role of the attorney is pivotal. Their job is to explain and thoroughly check all legal documents, as well as negotiate aspects of the contract to work in the client's best interest.
In Israel, every contract is an individual contract; there is no standard contract that is accepted by everyone without a need for a lawyer’s review.
Additionally, there are no contingencies when signing a contract, so all of your legal ducks need to be in a row before signing to avoid any problems down the line.
Attorney fees are not set or regulated, but they are expected to be between .75% - 1.25% + Ma’am.
The mortgage broker walks their client through all beauracracy and negotiates strongly on their behalf in terms of interest rates, terms, and length of the morgage with the bank.
The mortgage broker will help you get pre-approved for a loan if you are tight on finances. They will negotiate with the banks to get you the best possible rate. Binding contracts have no contingencies and are not subject to finance - a very notable difference from the United States!
Mortgage brokers charge 1% + Ma’am.
For example: if you are purchasing a property for 4,000,000 NIS, and take a loan of 2,000,000 NIS, the fee is 20,000 NIS + Ma’am.
Mortgage Fees and Valuation
The bank may charge a fee to open the loan at a rate of 0.25- 1%.
Your mortgage broker should negotiate this rate for you.
The bank may likely require a valuation to check the amount of the loan they will grant you.
The valuation costs approximately 3,000 NIS before you sign, or approximately 1,500 NIS after you sign.
As there are no contingencies in a contract, if you are mortgaging as much as possible, it might be worthwhile to have a valuation before signing.
The inspector’s role is to visit and inspect the property for any damage.
The inspection must be done before signing the contract, as there are zero contingencies!
Inspector's fees start from 2,500 NIS, depending on the size of the property.
Moving your money and exchanging currency to NIS in order to pay for your new home costs between 0.5 and 3%+ depending on the service you use (bank vs. money transfer company).
It is important to keep in mind that the purchase price is a set price in NIS and is therefore subject to fluctuate in USD or whichever currency you use. Your payments might vary each time due to the exchange rate on the day it is due!
For more information or to begin your property search in Jerusalem, please contact us today!
See all available Jerusalem real estate to buy here.