Legal Grounds: Land of milk and money

Can't obtain credit in the US or Canada? Have you tried Israel?

A Bank Hapoalim branch 248.88 (photo credit: Ariel Jerozolimski)
A Bank Hapoalim branch 248.88
(photo credit: Ariel Jerozolimski)
As we all know, Israel is the land of milk and honey. But can we recognize it in its new form as a land of milk and money? Because indeed, over the years, Israel has morphed into a country with a substantial industrial base, an economy that exports billions of dollars worth of products worldwide and a highly developed financial sector. Indeed, we Israelis are now in the position to say to our foreign friends: Can't get credit in your country? Have you tried Israel lately? For many years, about 5 percent of real estate purchased in Israel was bought by foreign residents, often without mortgages. This creates a very interesting financial opportunity: Combine foreigners, who own hundreds of millions of dollars in real estate, with a banking system that as has not been hit to the same degree by the raging storms in North America, and you have the possibility of providing credit. The idea is simple: Instead of selling your property in Israel because you are short on liquid cash, you may borrow on your property at various rates of interest. The good news is that if you know the ins and outs of the Israeli banking world, there are specific departments that are willing to lend, even generously, for long periods. Not every bank will lend to foreign residents. Even Israel, which has survived the worst parts of the crisis because of the highly regulated fiscal environment imposed by the Bank of Israel, feels the chill. Some banks, even mortgage banks, refuse to lend to people from outside of Israel. But there are banks that are willing to give foreigners, on the strength of their real-estate assets, long-term loans of 15-20 years at fixed interest rates. It is also possible to borrow very short term, such as a year or two, which would help those who are asset-rich but cash-poor. So how do you go about it? The first question to answer is, of course, what asset do you own and how much is it worth? Not long ago, even a few months ago, you could obtain a mortgage for 85% of the value of the property. The market was hot and banks were crowding to get in on the great lending fest. This now seems like centuries ago, but even in this atmosphere, depending on your credit rating and the location of your real estate, you can get a loan for 65% of value. The next stage is to be personally introduced to a willing bank. Worldwide, banks like to know their clients; they require references and as much information as possible on the potential borrower. But much of the red tape can be cut if the bank feels comfortable with the potential borrower, something that may be achieved if you are introduced by someone who has professional connections. Can you borrow in your local currency? Again, the good news is that you can borrow in American, Canadian, European and British currencies. So, in an amazing reversal of roles, Israel has become a powerful cash reservoir for many Diaspora Jews in a time of a cash crunch. Dr. Haim V. Katz is a senior partner in a prominent law firm in Israel. He has written several legal works on probate and land law including Buying Your Home In Israel.