Buying a home in Israel and obtaining a mortgage is a very different process from that of the United States or Europe. You'll need the assistance of a lawyer and a realtor to negotiate and close your transaction.
According to Forbes magazine 2008, Israel is now the number one up-and-coming real estate market in the world. After a few years of recession from 2000 to 2004 the Israeli market is growing exponentially with demand exceeding the supply. Previous limitations have been relaxed and it is now easier than ever to purchase in Israel. Responsible banking and mortgage practices have been a sound foundation for this exponential growth in demand.
Frequently Asked Questions
How much of a down payment will I need to purchase a home?
If you are living in Israel with a proven income, it is possible to purchase a home now with 10% of the purchase price. If you are living and earning abroad you may need as much as 40% down to obtain a mortgage in Israel, although it may be possible for your own US mortgager to give you an additional mortgage for another portion of that amount.
What can I expect to pay in closing costs?
A lawyer is required to draft the contract of sale and register the deed; his fee is usually 2%. Both buyer and seller participate in paying realtor fees, each paying their respective realtor 2%. These are standard costs but can be negotiated depending on the situation.
There is a graduated buyer’s tax ranging from 3%-5% based on the property cost. This tax is lowered to 0.5% for new immigrants and returning citizens.
Can I purchase a property if I am a non-citizen or non-Jewish?
In the majority of situations you can own if you are a non-citizen, non-resident or non-Jewish. You may experience visa limitations, but you can own property, large or small.
I want to rent in Israel or rent out my property once I buy, what will that cost me?
You will need a realtor to help you find a rental property in Israel. The realtor fee is one month’s rent for one year’s contract or more. For short-term rental the fee will be 10% of the total contract cost. You will be required to pay arnona, the annual property tax which can be paid on a monthly basis to the municipality.
If you want to lease the property you own, you'll need to pay a realtor/property manager a monthly portion of the rental income, for instance 5-10%. The tenant will pay the property tax. Whenever you lease the property to a new tenant you'll need to pay your realtor one month’s rent for one year’s contract. Unlike purchasing, you will not need a lawyer to draft a rental contract; your realtor can do that. You may want to seek a lawyer's advice regarding your rental contract.
Rental contracts are normally several pages long and can have complicated terms in Israel, unlike the simple rental contracts of the United States. You can expect to pay the landlord two months’ rent as a deposit as well as other forms of guarantees. It will all depend on the individual situation and can be negotiated.