Foreigner's guide to property market: Show me the mortgage

Unless you plan on paying cash for your apartment in Israel, you will need to obtain a mortgage here, real estate expert Lyle Plocher says.

By LYLE PLOCHER
August 14, 2011 09:57
3 minute read.
Sales of brand new homes dropped 5% in the first q

construction tel aviv 311. (photo credit: Ariel Jerozolimski)

 
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Unless you plan on paying cash for your apartment in Israel, you will need to obtain a mortgage. As most banks in the country of your origin will not loan you money for a purchase in a foreign country, you will need to arrange for an Israeli mortgage.

Types of Mortgages

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There are a variety of different mortgage products available in Israel. Some of them include the following:

Foreign Currency Mortgage - Available in a number of the major currencies. The mortgage's interest is the LIBOR rate plus a fixed premium set by the bank. These mortgages are generally available up to 25 years and the repayment is in the currency that was borrowed.

Dollar Linked Mortgage - A Dollar linked mortgage is a shekel mortgage linked to the dollar rate for a period of up to 30 years. The currency of loan and repayment is in shekels according to the dollar rate. The mortgage's interest is the LIBOR rate plus a fixed premium set by the bank.  There is also a variation of this type of mortgage, where the interest rate is fixed for the first 9 to 18 months.

Euro Linked Mortgage – Similar to the Dollar Linked Mortgage, except linked to the Euro. Obviously, these would be suitable for the person whose country of origin uses the Euro.

Shekel Linked Mortgages – Available in a few different forms, which include:
-Mortgages at a variable interest rate, linked to the CPI (Consumer Price Index).
-Mortgages at a variable interest rate, linked to the Bank of Israel’s prime interest rate. -Mortgages at a fixed interest rate, linked to the CPI.

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Other important things to be aware of

Length of Repayment – The predominate term for mortgages in Israel is 20 years.  If you want your mortgage amortized over a longer period of time, make sure and stipulate that to the Mortgage Broker or Banker that you are working with.   

Pre-qualification – It’s advisable to get pre-qualified for your Israeli mortgage before you start apartment shopping. Getting pre-qualified will help you avoid unnecessary disappointment when you find a place you like and then discover that you can’t qualify for the amount of money you need to complete your purchase. Also, you are a stronger buyer-candidate in the seller’s eyes when you have already been pre-qualified. Getting pre-qualified for a mortgage is a very simple process if you go to the right sources.

Latest changes with mortgage guidelines – There have been an abundance of changes in Lending guidelines this year in Israel. This has happened in part because the Bank of Israel has tried to intervene in the real estate market in an attempt to slow down the ever rising real estate prices. Earlier this year, the Bank of Israel made it more expensive for banks to loan more than 60 percent of the appraised value of the property being purchased. Then in May of this year, they introduced a new stipulation that 70% of a mortgage granted, now has to be at a fixed rate. 

Mortgage Broker vs. Banks – You might find it more advisable to deal with a Mortgage Broker who will shop for the best deal for you with competing banks and who will invest more time with you in searching for the mortgage product that is best for you, given your unique situation. 
 
 Lyle Plocher is the Director of Buy Property In Israel and can be reached by email at lyle@buypropertyinisrael.com.

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