Buying a house or an apartment in Israel: What to expect?
Buying an apartment to live in a different country is a very challenging task. Add to that the various issues arising due to bureaucracy in the banking system and the regulations in Israel, and one could regret the decision of purchasing a home in Israel.
But don’t give up just yet – that is what we are here for – to help guide you through the process.
Some key points to keep in mind as you start the journey:
Closing Date:
- The closing dates here in Israel tend to be long - up to a year or more, as sellers want to have adequate time to find a new place for themselves and adjust their moving out timing accordingly.
- In some cases, even though the buyer and the seller agreed on a closing date, there can be delays, sometimes for a few months. This is especially true if the seller was planning to move to a newly built house, but that house is not ready yet. As a buyer, always have your lawyer draft a section to protect you in such case for some compensation.
The payment structure:
- While you may be used to putting a down payment on a house in the USA or Canada of between 5%-25%, and pay the rest with a mortgage at closing, it is not usually the case here. In Israel, the seller can demand certain payment terms, which could include a substantial amount. Therefore, before going down the path to put an offer on a property, ensure you and the seller agree on terms for an acceptable payment schedule.
- As a buyer, you may need to take on a mortgage from the bank even before the closing date in case the seller requires a larger amount than you have available before closing. Therefore, be prepared to be able to carry concurrent mortgage and rental payments for a few months.
Dealing with Banks:
- As newcomers who have made Aliyah or returning residents, with no immediate source of income, banks may not find you suitable to provide you with a mortgage.
- It is advisable to use a reputable Mortgage Broker who can explain to you more on the terms and conditions and therefore help you save money on your mortgage.
- While in Canada or the USA one was able to take a 25 years mortgage at prime rate for the entire terms of the loan, here in Israel, the regulation requires the mortgage to be split into 3 streams (prime, fixed, fixed but tied to a certain inflationary index). This structure will tent to increase the carrying cost of the mortgage.
- Be aware of prepayment penalties – they can add up a lot to the cost of the mortgage in case you wish to refinance.
- The banks will only loan up to 70% of appraised value. Hence if you came to terms with a seller on a price, but the appraiser arrived at a lower value, the bank will only provide you with 70% of the lower value. You will have to come up with the balance as part of the down-payment.
There are many other factors to consider including but not limited to: The legal status of the apartment/building, improvement levies, structural status of the building, projected plans for the building and neighbourhood, and much more.
Let us help you navigate this maze and help you find your perfect home in Israel.
Canada: +1-437-889-6100
Israel: +972-51-213-7575
