The Two Key Limits: LTV and Income
How much you can borrow on a משכנתא (Mashkanta) (Israeli mortgage) is controlled by two constraints set by the Bank of Israel: the loan-to-value ratio (LTV) and your income relative to the monthly payment.
Loan-to-Value (LTV) Limits
The Bank of Israel sets maximum LTV ratios depending on how many properties you own:
- First apartment (dirat megurim — primary residence): up to 75% LTV. You must contribute at least 25% as a down payment
- Second or additional property: maximum 50% LTV. You must bring 50% as equity
- Improving housing (replacing an existing apartment): up to 70% LTV in most cases
Example: To buy a 2,500,000 NIS apartment as your first home, you need at minimum 625,000 NIS (25%) as a down payment. The bank can lend up to 1,875,000 NIS.
Income Requirements
Banks use a maximum payment-to-income ratio. The standard limit is that your total monthly mortgage payment must not exceed approximately 40–50% of your net monthly income (some banks use gross income). This ratio is assessed at loan approval.
Banks also run a "stress test" at higher interest rates — they check whether you could still afford the payments if rates rose by 2 percentage points from current levels. This makes the effective income requirement more conservative than the headline ratio suggests.
The Israeli Credit History Challenge
New olim do not have an Israeli credit history. Banks in Israel use the Bank of Israel's credit registry and Dun & Bradstreet Israel data to assess creditworthiness. With no local history, banks rely more heavily on:
- Current income documentation — recent pay stubs (tlushei maskoret) or employer letter for employed olim; tax returns or accountant certification for self-employed
- Foreign credit reports — US olim can provide a US credit report; UK olim a credit report from Experian or Equifax UK. Some banks accept these as supporting evidence
- Bank statements — 3–6 months of statements showing regular income and responsible financial behavior
- Down payment source — documenting where your down payment comes from (foreign assets, savings, gift from family) provides comfort to lenders
The absence of Israeli credit history makes the process slightly more manual but does not prevent mortgage approval for olim with documented income and a sufficient down payment.
Down Payment Sources for Olim
Where the down payment comes from matters to Israeli banks — they require documentation (source of funds declaration). Acceptable sources include:
- Savings transferred from abroad — document with wire transfer records and foreign bank statements
- Foreign property sale proceeds — document with sale contract and transfer records
- Gift from family members — banks typically accept a signed gift letter. Note: gifts above 50,000 NIS from abroad may trigger reporting requirements
- Retirement account distributions — proceeds from US 401(k) or IRA withdrawals (consider the US tax implications carefully before doing this)
Special Olim Considerations
Two specific advantages apply to olim seeking mortgages:
- Zakaut subsidized mortgage component — the government-backed portion at 3% (covered in the previous article) reduces the commercial mortgage amount needed and thus the income required to qualify
- Some banks offer higher LTV for olim — a small number of Israeli banks have historically offered olim first-apartment mortgages up to 75% LTV even when the property is not the buyer's only registered property (relevant if you still own property abroad). Ask explicitly whether your bank has an oleh mortgage program
A mortgage pre-approval (ishur ekroni) from a bank is useful before you start seriously searching for property — it tells you exactly how much you can borrow and gives sellers confidence that you are a qualified buyer.