Glossary

Hon atzmi (own funds)

In Hebrew: הון עצמי (hon atzmi)

Hon atzmi is your own money in the purchase. Since a bank may lend at most 75% of the price of a single home (70% replacement, 50% investment or foreign resident), you need at least 25% of the price in own funds, plus taxes and fees.

Directive 329 limits the loan to a share of the property's value (LTV), so the rest of the price must come from you. The minimum equity is therefore 25% for a single home, 30% for a replacement home and 50% for an investment property or a foreign resident. Expect the bank to ask you to document where the money comes from.

The price is not the whole bill. Purchase tax, the lawyer, an agent, the appraisal and moving costs come out of your own pocket, not out of the mortgage. Olim pay a much lower purchase tax on a single home bought within 7 years of aliyah, which lowers the cash you need. If you also use the state Zakaut loan, it counts inside the bank's cap: the total mortgage is generally capped at 75% of the price.

The pitfall is planning equity for exactly 25% of the price and forgetting the costs on top. Work out the purchase tax first, with the Tax Authority simulator, and add it to the cash you need.

Example

For a ₪2,400,000 single home the maximum loan is ₪1,800,000, so the minimum own funds are ₪600,000. An oleh who qualifies for the reduced purchase-tax scale pays about ₪2,106 of tax on top. If the buyer were a foreign resident (50%), the own funds needed would be ₪1,200,000.