Maximizing Your Buying Power: Israeli Mortgages
There has been a lot of talk about mortgages and financing in the past week, particularly among my clients who are looking to purchase property in Jerusalem.
It is crucial for many of them to secure financing, and I advise them to get pre-approval before signing any deals as financing is not a contingency.
During my recent trips, I have been fortunate to have exceptional panelists, including Chaim Friedman, one of the co-founders of First Israel Mortgages, with whom I have discussed the current state of mortgages.
One interesting point Chaim made is how borrowing in Israel is relatively cheap compared to the United States and most other places in the world, with fixed rates in the 4.5% to 5% range.
As mortgages are such a critical aspect of the purchasing process, I will highlight essential points you should be aware of regarding financing in Israel.
How much can you borrow in Israel?
Residential financing is available for non-Israeli citizens at a loan-to-value (LTV) ratio of up to 50%. An additional 10% may also be available as an unsecured loan at higher rates.
Israeli citizens, on the other hand, may be eligible for up to 75% financing if the property is their sole residence in Israel. Residential financing options generally offer lower rates and also provide the choice of fixed interest rates.
How are mortgages different in the US VS Israel?
Usually, Israeli banks require borrowers to obtain a life insurance policy that names the bank as the beneficiary for the loan amount. However, this requirement can sometimes be waived with the assistance of expert mortgage brokers like Chaim.
Banks in Israel tend to discriminate based on age and usually aim to limit the mortgage term so that it is fully repaid by the borrower's age of 82. Nonetheless, exceptions to this rule may be possible depending on individual circumstances.
Loans can be structured into multiple tranches, such as having half the loan as a fixed rate and the other half as a variable rate.
In Israel, pre-payment penalties may be applied to fixed-rate loans if interest rates are lower at the time of payoff, but no penalty is imposed if interest rates are higher. However, variable-rate mortgages do not have any pre-payment penalties.
Israel’s mortgage rates are extremely competitive!
Considering global events, it is noteworthy that fixed interest rates can be secured for below 5%, which is significantly more affordable than rates in the United States.
This advantage is particularly valuable considering the current trend of increasing rates. These rates can be locked in for up to 25 years, which is a substantial benefit.
With the US dollar remaining strong, the ability to secure a fixed interest rate for 20-25 years at such competitive rates is an advantage for Anglo buyers.
As a foreign Anglo buyer holding dollars, you have a strong position in the market.
In light of the current economic situation, financing in Israel can be a promising opportunity for Anglo buyers.
Israel offers some of the most competitive rates globally, making it feasible to secure the necessary financing.
I highly recommend contacting a knowledgeable broker such as Chaim with experience in this area.
Feel free to reach out to Chaim at firstname.lastname@example.org to discuss financing options.
(This article is not data-based but rather based on CapitIL’s CEO & Co-Founder Ben Levene’s personal market experience and opinions. No decisions should be made without thorough due diligence and professional financial advice.)
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