New immigrant? All you need to know about the Mortgage
We have collected 10 Q&A that will help you in your first steps of understanding mortgages in Israel
The Mashkanta – the Hebrew term for a residential mortgage is a crucial step towards purchasing your next Israeli home. We at Mizrahi-Tefahot Bank are here to provide you answers to 10 essential questions.
I made Aliyah recently. Am I entitled to a similar terms while applying for a mortgage?
Yes, providing that you are an Israeli citizen or entitled to Israeli citizenship. You are entitled to up to 75% LTV (loan to value) instead of 50% as a foreign citizen.
Please note that as an Oleh Hadash (New immigrant) you may also be entitled to a reduction of the purchase tax.
Please note that Israelis living abroad and foreign residents who wish to purchase a house in Israel must currently pay up to 8% tax. This is of course subject to government policy and can fluctuate.
What is the maximum finance rate for a mortgage in Israel?
Homebuyers with no other properties in Israel can get up to 75% finance rate for their first purchase. However, in a case of housing improvements the maximum finance possible is 70% and if you already have an apartment in Israel, the maximum finance rate will be 50%.
Am I entitled to unique benefits as an Oleh Hadash?
Olim are entitled to a loan of up to two hundred thousand shekels as part of their Mortgage. This loan, given by the ministry of housing, is for up to 30 years, and the interest rates might be lower than a mortgage given by the banks.
At Mizrachi-Tefahot Bank, we help our clients utilize all the state benefits as part of our mortgage service and provide our clients with the necessary documents for the state loan.
Do I have to work in Israel to get a Mashkanta?
All homebuyers must provide a proof of a monthly income (generated in Israel or abroad, including investment income etc.) as a threshold requirement for a mortgage.
Your repayment capacity is calculated according to your monthly income, regardless of personal wealth or existing property.
How does the bank calculate my repayment capacity?
Your repayment capacity is calculated according to your monthly net income: the bank of Israel limits the debt to income ratio to 40%. For example: if you and your spouse have a joint net income of 10,000 shekels, your monthly payment should not exceed 4,000 shekels per month.
How is Mashkanta structured?
Israeli banks offer clients various mortgages options to create an appropriate mix for each client. The most popular options is a loan linked to the prime rate, thanks to the low-interest rates and limited to 66% (two thirds) of the total amount, of the loan. A minimum of one third of the mortgage is to be set at a fixed rate. Mizrahi-Tefahot Mortgage advisors will present you with the various structure options and underline all consequences so that you can choose the proper structure for you.
How long does the mortgage process take?
The mortgage process contains two steps:
- The first occurs before signing the purchase contract and includes applying for an approval in principle for your application by presenting all relevant income documentation.
- After signing the contract, you will proceed to step two, signing all mortgage and collateral documents to place a deed.
- Once the mortgage file has been checked and fully completed the funds will be wired.
We strongly recommend signing the purchase contract only after receiving final approval and hiring a lawyer that will advise and escort you through all the steps of purchasing the property and obtaining the Mortgage.
Who does all the process for me?
The entire mortgage process of applying, presenting the necessary documents, and getting the approvals can be done personally or by a local Mortgage broker. We at Mizrahi-Tefahot have mortgage bankers spread around all our branches in Israel who are experienced in leading you through the process if you decide to proceed personally.
Of course, as mentioned, we recommend seeking the guidance of a lawyer who will accompany you in the transaction for the entire process.
Does the bank provide services and assistance in various languages?
Mizrahi-Tefahot bank is the national leader in mortgages, with a full range of services for Olim Hadashim. Our mortgage department includes experienced specialists that provide services in English, French, Spanish, Russian, etc., and are acquainted with the unique needs of Olim.
We are at your service at the mortgage hotline, where you will be introduced to a branch and a specialist that can guide you and help you until you set foot in your new house.
What should I pay attention to, while going through the mortgage process?
- First and foremost, make sure that you do not sign anything before receiving an approval in principle for a mortgage from the bank.
- Ensure that your lawyer approves all legal issues regarding the property, including ownership of the seller and correct and complete registration of the property.
- If you plan on wiring funds from abroad for the purchase, make sure to do that before signing the sale contract.
- The bank is legally obligated to check the origins of your funds and monthly income. Make sure you have all relevant documentation.
- Your lawyer is crucial to the whole process; make sure he knows your language, has experience advising Olim and can assist you in the mortgage process.
- Life insurance is a preliminary requirement for approval of your mortgage. We at Mizrahi -Tefahot can assist you in purchasing the right policy via "Tefahot" insurance agency.
- The above is for information purposes only and does not constitute an offer to provide the loan.
- Providing any type of credit is subject to bank discretion.
- Any default on the loan may entail arrears interest charges and enforcement proceedings.