Foreign residents

A mortgage for foreign residents in Israel is designed for individuals who are not citizens of Israel or Israelis with additional citizenship who do not reside in Israel but wish to invest in Israeli property. To qualify as a foreign resident, borrowers must provide a foreign passport to the bank.

Preferred Locations for Real Estate Purchase

Currently, real estate acquisition by foreign residents is widespread and encompasses various regions, not limited to the central part of the country. Although there is a diverse range of preferred localities, statistics highlight prominent areas where foreign residents often invest in apartments:

• Tel Aviv

• Jerusalem

• Netanya

• Herzliya

• Caesarea

• Modi'in

• Ra'anana

• Ashdod

• Nahariya

While foreign residents invest in various property types nationwide, there is a notable inclination towards luxury apartments. This trend both contributes to the rise in real estate prices in Israel and stimulates growth in the luxury apartment market.

Mortgage Options for Foreign Residents

Two key factors impact mortgage options, both generally and for foreign residents specifically:

1. Bank Policy: Banks, as commercial entities, approve mortgages based on profitability in terms of risk-return.

2. Regulation of Banks: The Bank of Israel, responsible for banking and mortgages, imposes restrictions to safeguard the banking system and protect consumers.

In most cases, due to regulation and bank policies, foreign residents can secure a mortgage covering up to 50% of the property's value. However, Israeli citizens residing abroad, possessing an Israeli identity card with no additional assets in Israel, may qualify for higher financing percentages.

Mortgage Routes for Foreign Residents

In addition to existing mortgage routes for Israeli residents, foreign residents have the option to link their entire mortgage to foreign currency. This is particularly relevant for those earning in a currency other than shekels, offering risk hedging against currency fluctuations.

For foreign residents opting for a dollar-denominated mortgage, banks offer linkage to the LIBOR rate, presenting a variable interest rate with associated risks. Foreign residents have the flexibility to choose between fixed or variable interest rates, as well as decide on linkage or non-linkage to the index. Unlike Israeli residents, foreign residents face no limits on amounts and can tailor their mix according to their preferences.

To secure a mortgage for foreign residents, a demonstration of financial history from the borrower's country of origin is necessary. This includes presenting relevant bank forms showcasing income levels and financial standing, as per the bank's requirements. While a lien on the property is required, unlike a typical mortgage for Israeli residents, the income from outside Israel cannot be seized.

Tax Considerations

Israeli tax policy discriminates against foreign residents, resulting in higher property taxes. Foreign residents face two tax levels:

• 8% on the portion of the value up to NIS 5,338,290

• 10% on the part of the value above NIS 5,338,290

These rates are steeper compared to those paid by Israeli residents when purchasing a property. Additionally, foreign residents must declare the property purchase to the tax authorities in their home country.

Process of Obtaining a Mortgage for Foreign Residents

The initial step involves foreign residents approaching the bank for preliminary approval for a mortgage. It is advisable to consult multiple banks simultaneously to compare offers, considering potential differences in fees and interest rates. The returns to the bank should be made from an Israeli bank account, necessitating the opening of a new account if one doesn't exist.

Banks typically require various forms and certificates before granting a mortgage. Given the increased risk associated with foreign residents, the process may be more prolonged and involve additional documentation.

Documentation required for a mortgage for foreign residents includes routine documents, such as identification details, residential address, payslips, income details, and property ownership documents. Additional documents vary based on the borrower's country of origin and the bank's policy.

Choosing Suitable Banks for Foreign Residents

While many banks are inclined to offer mortgages to foreign residents due to their affluent status, some banks may impose bureaucratic challenges or reject applications due to perceived risks. It's essential for foreign residents to choose banks with experience in handling mortgages for non-residents.

Necessity of Advice for Mortgage for Non-Residents

Seeking professional advice for obtaining a mortgage for non-residents is crucial due to the complexity of the process, extensive paperwork, and unfamiliarity with Israeli bureaucracy. A mortgage advisor, well-versed in the policies and requirements of banks regarding credit for foreign residents, plays a key role in the success of the process. Foreign residents, unfamiliar with the Israeli economic system, benefit from the advisor's expertise in navigating the unique aspects of obtaining a mortgage in Israel.

At "Mashkanta.Nekuda," we provide comprehensive professional advice and guidance throughout the entire mortgage application process for foreign residents. This includes facilitating communication with the bank, translating documents, and ensuring a well-organized submission.