Financing real estate purchases

Not all overseas buyers of Israeli property are millionaires, and the properties they buy are adapted to their level of income and the depth of their pockets.

By JAMES HARRIS
SHIKUN & BINUI REAL ESTATE (photo credit: SHIKUN & BINUI REAL ESTATE)
SHIKUN & BINUI REAL ESTATE
(photo credit: SHIKUN & BINUI REAL ESTATE)
Demand for local real estate from overseas buyers is growing anew as Jews from the US, the UK, the CIS and other countries are busy buying property. Many of them buy property at the very high end of the market -- apartments of more than $1 million At these times, overseas buyers have more modest needs; and since money is less plentiful than it was two or three years ago, these buyers might need financial help. In real estate terms, that means a mortgage.
Not all overseas buyers of Israeli property are millionaires, and the properties they buy are adapted to their level of income and the depth of their pockets. Some of the potential overseas buyers of local real estate have the necessary funds to purchase a property outright, but others don’t want to see their money tied to brick and mortar.
They prefer to have it invested in a business venture that will give them a yield superior to what they will be repaying the banks.
These people need a mortgage. And if they have a good credit record, they will get it.
Banks in the US, the UK and other European countries might not give credit to those who have real estate in Israel as collateral, but Israeli banks are glad to oblige. Israeli clearing banks and mortgage banks are happy to cater to the needs of overseas buyers of property. After all, a mortgage that is covered by a property is a very secure credit.
Real estate prices in Israel have never fallen below 15%. This means that a mortgage of, say, up to 70 percent of the value of the property is very safe, even if the borrower defaults.
And banks are indeed happy to give mortgages of up to 70% of the value of the property at interest rates which, on average, amount to 1.8% above the three-month LIBOR.
Zvika Tabachnik, deputy general manager of The Union Bank of Israel, told Real Estate, “We are very active in this market and have developed a system whereby we give our overseas customers mortgages in the currency of their choice.
The mortgages of most Israeli banks are in shekels linked to the US dollar, pound sterling, euro, yen or other currencies.
Our mortgages are in a foreign currency. This means that an overseas buyer can transfer money for the monthly repayments directly to his mortgage account without having to pay the exchange rate of changing dollars or pounds or euros into shekels.”
Most banks in Israel cater to overseas residents. For foreign residents who want to buy property in Israel and need to finance part of it with a bank credit, the banks have special departments with multilingual staff. Most put an emphasis on fast, personalized customer service.