Sometimes I meet with clients who have just been told by their mortgage bank that they can only get 50% financing. This is especially true of foreign residents looking to buy their home in Israel, and often they are quite disappointed by this revelation, as a 50% deposit requirement can be a deal breaker.
Sometimes the bank is correct and 50% is truly the maximum possible financing. But often there are creative solutions to get a much higher level loan-to-value ratio (LTV).
Here are a few suggestions of how to get a larger mortgage:
1 - Get Approved For Aliya
If you are planning to make Aliya in the next 18 months and are approved for Aliya by the Jewish Agency, you can easily get a 75% mortgage even though you are a foreign resident.
2 - 50% Pre Aliya - 25% Post Aliyah
If you are buying a new build house or signed on a long completion, and are only getting the keys after you make Aliyah, you can get a 50% mortgage now and then a further 25% after making aliyah.
3 - Bank Side-Loan
In addition to mortgage debt secured against the house, the bank can issue a side-loan directly to your Israeli bank account to cover the costs of purchasing and renovation. This loan is usually for a maximum of 10 years, but it can add up to an extra 20% of bank financing to the deal.
4 - Buy In The Name Of An Israeli-Based Child
If you are living abroad but your son is studying in Israel for the year, buying the property in his name will save you a small fortune in purchase tax, and also enable you to get 75% LTV. This applies even if your son is not an Israeli citizen and has no income.
5 - Secondary Lending
Although Israeli banks are limited to 50% financing for foreign residents, you can still get additional financing from a secondary lender. The rates may be higher than a normal mortgage, but nonetheless this can unlock up to 85% financing.
6 - Buy As A Company
Buying a property as a company - as opposed to as a private individual - changes the nature of the deal from residential to commercial, which raises the financing limit from 50% to 70%. However, this can make the interest rates slightly higher.
Summary
Every situation is unique and has its own special characteristics. Speaking to a knowledgeable and experienced mortgage broker can dramatically improve your ability to borrow.