Buying a home in Israel isn’t just a transaction; it’s a significant step towards creating your sanctuary in a new country. The process of purchasing property can be complex, with legal, financial, and logistical considerations. That’s why we’re here to guide you through these essential steps, from understanding the market to sealing the deal—because your path to homeownership doesn’t have to be a challenge.
What you need to take under consideration when buying a home in Israel
Choosing where to live in Israel has its own set of considerations. Some of them include:
- Budget – Determine your budget and stick to it. Consider all of the associated costs such as down payment, closing costs, and ongoing expenses like property taxes and maintenance
- Location – Choose a location that suits your lifestyle and is close to the amenities you need such as schools, synagogues, shops, healthcare facilities, and public transportation
- Size – Take into consideration the dimensions of the home and whether it fits your current and future requirements
- Condition – Check the condition of the property to determine if there are any major repairs or renovations needed. You may want to hire a professional home inspector to help identify any issues
- Legal status – It’s recommendad to hire a real estate lawyer to investigate the property title and find out whether there are any outstanding liens or seller declarations
Steps to a new home in Israel
To own a home In Israel you need to take the following steps:
1 Pre-Approval for a Mortgage
If you choose to take out a mortgage (Mashkanta), before starting the search for a home, a pre-approval (Ishur Ekroni) from a bank is necessary.
2 Determine Your Budget
Based on the pre-approved mortgage, you can determine your budget and decide on the area and type of property you are interested in buying.
3 Additional Costs
Before making a purchase, it’s crucial to consider the closing costs as part of your overall budget. Closing costs encompass the additional expenses incurred outside of the home purchase itself. These expenses may include fees for an agent, attorney, mortgage broker, financing charges, purchase tax, bank transfer fees, and currency conversions. It’s essential to factor in these costs to have a comprehensive understanding of the financial implications involved in the home-buying process.
4 Finding a Real Estate Agent
You may buy directly from the owner without an agent, a practice that is becoming more common in the Internet era, or hire a real estate agent of your choosing.
5 Tour Selected Properties
After finding a few properties of interest, you should view them in person, preferably in daylight to get a clear picture of the property. It’s recomended to bring a hired professional with you on the tour, just to be on the safe side.
6 Make an Offer
If you find a property you want to purchase, you can make an offer to the seller directly or through your real estate agent.
7 Sign the Contract
Once the seller accepts your offer, you will have to sign a real estate purchase agreement with the assistance of a lawyer.
8 Complete the Purchase
Before completing the buying process, conduct a final inspection of the property to ensure it meets your expectations. Transfer the agreed-upon funds to the seller’s bank account and register the property in your name with a trusted attorney.
9 Pay the Purchase Tax
After closing on the home, you will have to pay the applicable purchase tax to the Israel Tax Authority.
Mortgage
Applying for a Mortgage (Mashkanta)
Applying for a mortgage is like going on a first date – nerve-wracking, exciting, and you hope they’ll say yes!
The initial step in purchasing a home is to apply for a mortgage unless you are paying in cash. To do this, you must approach a bank or a mortgage broker. A mortgage broker can be hired to handle all the necessary details for you.
When you find a home you want to buy, it’s advisable, as a first step, to obtain pre-approval from at least one bank. This ensures that you qualify for the necessary mortgage before initiating the application process. Banks in Israel assess factors such as your age, income, and the size of your down payment to determine your eligibility for a mortgage and its potential sum.
Here is a list of Israeli mortgage banks that can help evaluate your eligibility:
Legal advice
Hire a Lawyer
When hiring a lawyer, make sure they specialize in real estate law and that it’s not your cousin’s electrician, Moishe, who once interned as a personal injury lawyer.
Your lawyer will check the property’s ownership status as well as rights to the property. They will also negotiate agreement terms such as payment schedules. As soon as you grant them Power of Attorney, they will have the authority to review and sign legal documents on your behalf. It is highly advisable to hire a lawyer at the beginning of the process to avoid making any irreversible mistakes.
Also, if you’re buying a home in Israel it may have implications on your home country’s tax authorities. Therefore, consulting with a local attorney is advisable.
It is also highly recommended to hire an appraiser when buying a home. An appraiser can provide an impartial estimate of the property’s value, aiding in determining a fair offer. This helps in avoiding overpayment or potential mortgage approval issues due to overvaluation. If any issues regarding the property’s value or condition arise during the buying process, the appraiser can offer an expert opinion to resolve the issue.
Homeowner Rights & Benefits
Like all Israelis, under the ‘Single Residence Benefit’, an Oleh who buys a home valued at up to approximately 1.9 million NIS and declares it as their sole residential property is exempt from paying the purchase tax.
Estimate the purchase tax for a home you’re considering buying in Israel here.
New Olim are also entitled to a reduced tax bracket even if the home they purchased isn’t their only residence in Israel. To take advantage of this benefit, the home must be bought no earlier than one year before Aliyah and no later than seven years after Aliyah. The new Oleh must also reside in the property and cannot rent it out.
These are the purchase tax brackets:
- 0 NIS up to 1.9 million NIS – 0.5%
- From 1.9 million NIS and above – 5%
For Israelis, every second apartment is subject to a purchase tax of 8% of the entire transaction value, starting from the first Shekel up to a maximum of 6 million NIS. Above 6 million, the tax rate increases to 10%.
