Mortgage for Foreign Residents
Obtaining a mortgage as a foreign resident involves a different process, and usually the loan-to-value (LTV) ratio is more limited and requires a larger equity contribution. Banks often indicate a ceiling of about 50% of the property's value, subject to eligibility checks and approval in principle before signing, even when the property has already been selected.
As with any mortgage, the bank will assess the application and request details about the borrowers, their incomes and the apartment being purchased in order to give approval in principle for the mortgage. In addition, the borrower will be required to provide various documents that may vary from country to country.
When you live abroad, the challenge is less the property and more the coordination around it, preparing the required documents in advance according to the country of residence, taking care of verifications when necessary, and submitting an orderly application. Mortgage counseling helps to get things in order, so that when you reach the signing stage in Israel, everything is clear and ready.
Questions and answers about mortgages for foreign residents
We have compiled for you common questions and answers on the subject of mortgages for foreign residents, so that you can receive well-founded and organized information, which will help you understand the main concepts, options and steps in the process.
Who is considered a foreign resident for the purposes of a mortgage?
For the purposes of a mortgage, a "foreign resident" is usually someone whose center of life is not in Israel, even if they are an Israeli citizen. The banks look at the permanent place of residence, the main source of income and the tax residency to determine the status, which affects the terms of financing.
What is the mortgage loan-to-value (LTV) ratio for foreign residents?
According to Bank of Israel guidelines, the maximum loan-to-value (LTV) ratio for foreign residents is 50% of the property's value. The reason is that the purchase is classified as an "investment property", therefore a higher equity of at least 50% of the apartment's cost is required.
What identification documents should be presented to the bank?
You will need to present a valid foreign passport and usually another form of official identification. If the process is carried out through a power of attorney, the bank will require reliable identification of the attorney-in-fact as well as a specific notarial power of attorney for taking out the mortgage.
How do you prove income from abroad for the purpose of the mortgage?
Income documents from abroad, such as payslips, tax reports and employment certificates, must be presented, when they are translated into Hebrew and verified. The bank examines the stability of the income and its level in relation to the required monthly repayment (repayment ratio) in order to approve the financing of the apartment for a foreign resident.
Why does the bank require FATCA/CRS statements?
These are international regulations to prevent tax evasion. The banks are obliged to identify the tax residency of each customer, so you will be asked to fill out a statement to that effect. US citizens will often need to fill out a W-9 form.
How do you sign documents when you are abroad?
The mortgage documents can be signed at the local Israeli consulate or before a public notary abroad with the addition of an "Apostille" certificate. It is important to coordinate this in advance, since a consular or notary signature is a critical step that requires preparation.
How Much Purchase Tax Does a Foreign Resident Pay?
Purchase tax for a foreign resident is usually calculated according to the rates of an "additional residential home" (investment apartment), which are significantly higher than the rates of a "single residential home". It is recommended to use the official tax authority calculator to get an accurate estimate.
How Can Mortgage Payments Be Protected from Currency Fluctuations?
Income in foreign currency exposes you to the risk of changes in the exchange rate, which may make the monthly shekel repayment more expensive. When building the mortgage mix, it is worthwhile to consider unindexed mortgage tracks to reduce dependence on the local economy.
How long does the mortgage process take for a foreign resident?
The mortgage process for a foreign resident in Israel is longer, mainly because of the need to translate and verify documents from abroad and coordinate remote signatures. Getting approval in principle as early as possible is essential to avoid additional delays.
What are the common mistakes to avoid?
The common mistakes in mortgages for foreign residents in Israel are insufficient equity (typically at least 50% is required), submitting documents without translation and verification, and ignoring related costs such as purchase tax. Another mistake is choosing a mortgage mix that does not take into account the foreign exchange risks.