Financing limits in Israel
Loan-to-value (LTV, שיעור מימון) is the loan divided by the price of the property. Bank of Israel Directive 329 sets the maximum:
- 75% for a single home (דירה יחידה)
- 70% for a replacement home (דירה חליפית), when you buy a new home and will sell the one you own
- 50% for an investment property (דירה להשקעה)
- 50% for a foreign resident (תושב חוץ, defined below): a home bought by a foreign resident cannot be a single or replacement home under the directive, so it is treated as an investment, whatever the use
Mortgage insurance does not allow a bank to go above these limits.
What 50% means in cash
For a ₪3,000,000 apartment, a buyer who counts as an "Israeli citizen" under the directive and buys their only home in Israel can borrow up to ₪2,250,000 and needs at least ₪750,000 of their own money. A foreign resident, or anyone buying an investment property, can borrow at most ₪1,500,000 and needs at least ₪1,500,000, plus taxes, legal fees and other costs.
If your own funds come from abroad, the exchange rate on the day you transfer also changes what the purchase costs you.
Who counts as a foreign resident
Directive 329 does not decide by your passport or by where you live. A single home or a replacement home must be bought by an individual who is an "Israeli citizen" as defined in section 16A of the Land Taxation Law. That covers anyone who is registered, or must be registered, in Israel's Population Registry; any individual who is an Israeli resident; and anyone entitled to immigrate under the Law of Return who lives in Judea and Samaria. A "foreign resident" is anyone who is none of these. So an Israeli citizen living abroad who is registered in the Population Registry is not automatically a foreign resident and can borrow up to 75% for their only home in Israel, while a buyer who fits none of these categories is held to 50%. Ask the bank how it classifies you before you sign a purchase contract.
New immigrants should also check the state mortgage (Zakaut, משכנתא לזכאים). For 15 years from receiving immigrant status, olim are scored under their own points table. You apply through a mortgage bank, and the Ministry of Construction and Housing issues the certificate.
Funding the rest
Some buyers who already own a property in Israel borrow against it to fund the down payment. That loan is also subject to Bank of Israel limits and to the bank's own assessment, so ask for the figures before you count on it.
Money transfers and compliance
Israeli banks must check where your money comes from under anti-money-laundering rules. Expect to show bank statements, proof of how the money was earned or of the sale it came from, and tax documents. A transfer from abroad can also be held while your bank at home runs its own checks, so start early and have the paperwork ready before you sign.
US citizens and residents: under FATCA, Israeli banks report the accounts of US persons to the US tax authorities and ask for a W-9 form. If you are thinking of buying through a company, check the tax and financing consequences with an adviser and the bank before you buy.
Checklist before you buy
- Ask the bank whether you count as an "Israeli citizen" or a "foreign resident" under Directive 329, and whether the home will be your only home in Israel.
- Get a principle approval (אישור עקרוני) from more than one bank before signing.
- Prepare a source-of-funds file: statements, tax returns, sale documents.
- Plan the currency transfer and its timing.
- If you are an oleh, ask the bank to check your Zakaut eligibility at the same time.
The 50% limit for foreign residents is set by regulation and cannot be negotiated, so the work is in preparing the money and the documents early.