In Israel, buying real estate successfully is often quite simple. Notice I didn’t say easy. Deals can sometimes move quickly and efficiently, but for international buyers, the margin for error is much wider.
The reason is straightforward: many foreign buyers enter the process without the necessary knowledge. Usually, this isn’t due to negligence, but rather to a natural assumption that the system in Israel works the same way it does back in their country of origin. As readers of my articles already know, that assumption is often wrong. Real estate in Israel operates differently - legally, financially, and practically.
In this article, I focus on one of the most critical aspects of purchasing property in Israel: financing and mortgages. When not planned properly and early on, financing issues can unnecessarily complicate a transaction and, in some cases, completely derail a buyer’s chances of purchasing their dream home. I’ll explain how the Israeli mortgage system actually works, why early preparation is essential, and where the key differences lie compared to what many buyers are used to abroad.
No mortgage contingencies
One of the most important concepts foreign buyers must understand is that, in Israel, there are virtually no mortgage contingencies. Purchase contracts are not conditional on receiving financing approval. Once a contract is signed, the buyer is legally committed, regardless of whether a bank later approves or denies the mortgage.
Exiting a signed purchase agreement due to financing issues typically involves significant financial penalties. This reality alone makes early mortgage planning not just advisable, but essential. Any buyer who requires financing should treat mortgage preparation as a prerequisite, not an afterthought. Waiting until after a property has been found to begin the mortgage process can place buyers in a highly stressful position- hoping not only that the bank will finance the full value of the property, but that it will agree to fund the deal at all.
Credit pre-approval: your first step
This is precisely why obtaining mortgage pre-approval from the bank early in the process is so important. A pre-approval is issued for the borrower, not for a specific property. It provides a realistic picture of how much a bank is willing to lend based on income, existing financial obligations, and regulatory limits.
With a pre-approval in place, buyers can search for properties within clear and appropriate boundaries. It helps avoid a common and painful scenario: finding a property, signing a contract, and only afterward discovering that the bank will not finance the purchase at the required level. In such cases, the responsibility to bridge the gap falls squarely on the buyer, and additional equity into the deal is required.
How much can you borrow?
Israeli lending regulations are clear and strictly enforced. Israeli citizens and new immigrants purchasing their first home can generally borrow up to 75% of the property’s value, subject to income verification and debt-service checks. Any additional residential property is typically capped at 50% financing. Foreign residents, even when purchasing their first property in Israel, are also limited to 50% financing.
There are non-bank lenders that can provide supplemental financing, sometimes bringing total leverage as high as 85%. While this option exists, it comes at significantly higher interest rates and is usually reserved for situations where no other solution is available.
Income verification and bank scrutiny
Israeli banks are methodical and conservative when it comes to income verification. For foreign residents, lenders typically review the last two years of tax returns and require an accountant’s letter estimating net income for the current year. Israeli salaried employees are usually asked to provide their last three pay slips, while self-employed Israelis are generally required to submit their most recent tax return along with an accountant’s income estimate for the current year.
In all cases, banks apply conservative stress tests to ensure borrowers can comfortably service their loans, even in scenarios where interest rates rise.
The appraiser’s role
Once a specific property is selected, the bank appoints an appraiser. Many buyers assume the appraiser’s role is limited to confirming market value, but in reality, their responsibility goes far beyond pricing.
The appraiser verifies that the registered apartment size matches the physical reality of the property, confirms proper registration, and checks for any illegal construction or planning irregularities. If unapproved extensions, illegal partitions, or discrepancies between the registered and actual apartment exist, even if they seem minor, the bank will not fund the mortgage. In some cases, financing can be halted entirely due to issues that could have been addressed earlier through proper due diligence.
For second-hand apartments, banks and appraisers tend to be conservative. If the appraisal value comes in below the agreed purchase price, the buyer must bring additional equity into the deal. The bank cannot bridge this gap and is bound by Bank of Israel regulations regarding maximum financing levels.
In contrast, when purchasing a new-construction apartment from a developer, the process is often simpler. Since the project already carries a bank guarantee, financing is typically based on the purchase price stated in the sales contract rather than a traditional market appraisal.
Timing the mortgage correctly
For insight on timing, I spoke with Moises Zack of First Israel Mortgages, a veteran mortgage broker in Israel who specializes in working with international clients. According to Zack, for most transactions up to approximately 7 million shekels, mortgage pre-approvals usually take between seven and ten business days, and in some cases even less. Appraisal reports typically take around ten days and can often be completed in parallel.
Once a contract is signed, it is essential to ensure there is sufficient time to fund the mortgage and that the timeline aligns with the payment schedule set out in the sales agreement. “I make it clear to clients that I typically require about 60 days to fund a mortgage,” Zack explains. “That timeframe is generally sufficient, assuming there are no major holidays or periods when the banks are not operating normally.”
In Israeli real estate transactions, the buyer’s equity is paid first, with the mortgage usually serving as the final payment. Proper planning and realistic timelines help ensure the transaction proceeds smoothly, without unnecessary pressure or last-minute complications.
Buying and financing from abroad
Many foreign buyers are surprised to learn that mortgages in Israel can be fully approved and funded without the buyer ever being physically present in the country. Through a power of attorney granted to their lawyer, the entire mortgage process can be handled remotely - including signing mortgage documents, paying taxes and fees, and registering the loan.
I have personally completed several transactions in which clients successfully purchased property and also funded their mortgage without setting foot in Israel at any stage. For buyers with demanding schedules or long travel distances, this flexibility removes a significant logistical barrier from the process.
Final Thoughts
Mortgages in Israel are not complicated, but they are unforgiving if misunderstood. There are no contingencies, appraisals are strict, and banks operate within firm regulatory limits. At the same time, the system is structured, predictable, and highly functional when approached correctly.
With early preparation, clear expectations, and the right professional guidance, financing becomes a tool rather than an obstacle. When handled properly, it allows buyers to move forward with confidence and turn the goal of owning property in Israel into a reality.
Noah Sander is a Canadian-born real estate agent based in Tel Aviv, specializing in helping international buyers and new olim navigate the Israeli property market. For inquiries: [email protected], his brokerage: Daon Group Real Estate