Mad Hon · Housing cost

Plan your first Israeli mortgage

Plan your first Israeli mortgage. A step-by-step Mad Hon guide for your Housing cost score, written for olim.

1. Work out the payment you can carry, and know where the bank stops.
The Bank of Israel does not allow a housing loan where the monthly payment exceeds 50 percent of disposable income, and above 40 percent the bank has to hold much more capital against the loan, which is why offers get noticeably harder around there. Treat 40 percent as the practical ceiling and something lower as the comfortable one. Count what a mortgage does not cover but a home still costs: arnona, va'ad bayit, building insurance and maintenance all land on the same budget.
2. Know which loan-to-value bracket you fall into.
The maximum the bank may lend is 75 percent of the value for a single dwelling, 70 percent for a replacement home you are buying while selling your existing one, and 50 percent for an additional property. So a first home needs at least 25 percent of the price from your own resources, and an investment property needs half.
3. Check which side of the citizenship line you are on.
This is the part of the rules written about you. The 75 percent bracket is defined for a single dwelling bought by an individual who is an Israeli citizen, and the directive defines a foreign resident as somebody who is not an Israeli citizen. An oleh who has taken citizenship is inside the bracket; somebody buying while still on a temporary visa is not, and falls into the 50 percent one. The bank also has to receive a copy of the declaration you filed with the Tax Authority about the purchase, so the answer you give there and the bracket you ask for have to be the same answer.
4. Treat the mix as a structure, not a preference.
An Israeli mortgage is normally split across several tracks in one loan. A prime-linked track moves with the Bank of Israel rate. A fixed unlinked track does not move at all. An index-linked track, fixed or variable, is the one with no counterpart in a US or UK mortgage: the outstanding principal itself is adjusted with the consumer price index, so the balance can rise while you are paying it down. The rules cap the variable portion at two thirds of the loan and the term at 30 years, which means at least a third of what you borrow is fixed by construction.
5. Price the purchase tax separately, and ask about the olim relief.
Mas rechisha, purchase tax, is paid to the Tax Authority and is not part of the deposit or the loan. It runs on progressive bands that depend on whether this is your only home, and it is a large number that surprises people who budgeted only for the deposit. A relief exists specifically for olim, and its rules were changed in 2024, so it is worth pricing with the Tax Authority's own calculator or with an advisor who has handled it recently, before you commit to a price rather than after.
6. Get the file into the shape an Israeli lender expects.
Expect to produce recent payslips, an employer confirmation of your seniority, several months of statements from every account including accounts abroad, and evidence of where the deposit came from. That last one is where olim lose weeks: money arriving from another country goes through the bank's compliance checks, and a gift or a transfer from a foreign account needs a documented trail. Start it early. If you are self-employed, expect two or three years of returns instead of payslips.
7. Get an approval in principle from more than one lender.
The rate on offer depends on your file, not on a published price list, and lenders differ. Applying to two at the same time is normal here and it is the only way to know whether the first number was a good one. Ask for each offer in writing, broken down by track, and compare the total repayment rather than the monthly figure.

Plan your first Israeli mortgage. A step-by-step Mad Hon guide for your Housing cost score, written for olim.

1. Work out the payment you can carry, and know where the bank stops.

The Bank of Israel does not allow a housing loan where the monthly payment exceeds 50 percent of disposable income, and above 40 percent the bank has to hold much more capital against the loan, which is why offers get noticeably harder around there. Treat 40 percent as the practical ceiling and something lower as the comfortable one. Count what a mortgage does not cover but a home still costs: arnona, va'ad bayit, building insurance and maintenance all land on the same budget.

2. Know which loan-to-value bracket you fall into.

The maximum the bank may lend is 75 percent of the value for a single dwelling, 70 percent for a replacement home you are buying while selling your existing one, and 50 percent for an additional property. So a first home needs at least 25 percent of the price from your own resources, and an investment property needs half.

3. Check which side of the citizenship line you are on.

This is the part of the rules written about you. The 75 percent bracket is defined for a single dwelling bought by an individual who is an Israeli citizen, and the directive defines a foreign resident as somebody who is not an Israeli citizen. An oleh who has taken citizenship is inside the bracket; somebody buying while still on a temporary visa is not, and falls into the 50 percent one. The bank also has to receive a copy of the declaration you filed with the Tax Authority about the purchase, so the answer you give there and the bracket you ask for have to be the same answer.

4. Treat the mix as a structure, not a preference.

An Israeli mortgage is normally split across several tracks in one loan. A prime-linked track moves with the Bank of Israel rate. A fixed unlinked track does not move at all. An index-linked track, fixed or variable, is the one with no counterpart in a US or UK mortgage: the outstanding principal itself is adjusted with the consumer price index, so the balance can rise while you are paying it down. The rules cap the variable portion at two thirds of the loan and the term at 30 years, which means at least a third of what you borrow is fixed by construction.

5. Price the purchase tax separately, and ask about the olim relief.

Mas rechisha, purchase tax, is paid to the Tax Authority and is not part of the deposit or the loan. It runs on progressive bands that depend on whether this is your only home, and it is a large number that surprises people who budgeted only for the deposit. A relief exists specifically for olim, and its rules were changed in 2024, so it is worth pricing with the Tax Authority's own calculator or with an advisor who has handled it recently, before you commit to a price rather than after.

6. Get the file into the shape an Israeli lender expects.

Expect to produce recent payslips, an employer confirmation of your seniority, several months of statements from every account including accounts abroad, and evidence of where the deposit came from. That last one is where olim lose weeks: money arriving from another country goes through the bank's compliance checks, and a gift or a transfer from a foreign account needs a documented trail. Start it early. If you are self-employed, expect two or three years of returns instead of payslips.

7. Get an approval in principle from more than one lender.

The rate on offer depends on your file, not on a published price list, and lenders differ. Applying to two at the same time is normal here and it is the only way to know whether the first number was a good one. Ask for each offer in writing, broken down by track, and compare the total repayment rather than the monthly figure.