As a mortgage broker I can say with confidence that this is usually a buyer's first and most urgent question, and the answer is not so straightforward. This brief article will focus on the maximum loan-to-value (LTV) limits of Israeli banks, which are set by Bank Of Israel regulations. We will not be focusing on any other limitations that might be caused by income, age, or any other limiting factor.
How Much Is Maximum Financing?
Israeli banks can give a mortgage of up to 75% LTV, but this is only available to an Israeli resident buying his first property in Israel. The Israeli Tax Authority defines such a purchase as a Dirat Yechida - the buyer's primary Israeli residence.
The definition of 'Israeli Resident' includes people who reside full time in Israel but do not have Israeli citizenship. Strangely, it can also include Israeli citizens who live abroad.
In certain circumstances a mortgage bank can arrange an unsecured loan of up to a further 10% of the purchase. This loan is usually significantly more expensive than a normal mortgage loan, and has a maximum loan term of 10 years, but it can be a creative way to effectively borrow 85% of the property.
What if Only One Spouse Is Israeli?
Usually the bank will lend 60% finance in this case.
What if I'm not an Israeli First-Time Buyer?
If you are a foreign resident or you already own a property in Israel, the Israeli Tax Authority defines the purchase as an investment property (Dira Le'Hashka'ah) and the maximum loan amount available is 50%.
However, there are a number of creative solutions to get more money from the bank:
Qualified borrowers may be able to get a further 10% as an unsecured loan (as above).
Foreign residents can buy the property in the name of a family member who lives in Israel, and thereby qualify for a 75% loan.
Sometimes it makes sense to buy the property using a company. Such a loan is slightly more expensive than a residential loan, but it enables the banks to lend up to 70% finance.