The first question almost every couple asks: "How much money do we need to buy an apartment?" The short answer is "at least a quarter of the price, plus a bit more." The full answer matters more, because that "bit more" is what breaks deals.
The Bank of Israel rule
The Bank of Israel limits the financing ratio (LTV), the share of the apartment's value that a bank may finance:
- Single (only) apartment: up to 75%, which means at least 25% equity.
- Replacement apartment (upgraders): up to 70%, at least 30% equity.
- Additional apartment / investment: up to 50%, at least 50% equity.
Important: the financing ratio is measured against the lower of the purchase price and the appraised value. If the appraiser values the apartment below what you paid, you will need more equity.
The costs beyond the equity
This is where most people get confused. The 25% goes toward the apartment itself. On top of it there are:
- Purchase tax – for a single apartment there is no tax up to NIS 1,978,745, with brackets above that. Purchase tax explained
- Lawyer's fee – usually about 0.5%–1% of the price, plus VAT.
- Appraiser – from several hundred to a few thousand shekels.
- Real estate agent – if there is one, usually about 2% plus VAT.
- Bank fees, insurance, moving, light renovation and furniture.
Full list: All the costs of buying an apartment.
A numerical example
A couple buys a single apartment for NIS 2,200,000 through an agent:
| Item | Estimated amount |
|---|---|
| Equity (25%) | NIS 550,000 |
| Purchase tax | about NIS 7,740 |
| Lawyer (0.5% + VAT) | about NIS 13,000 |
| Agent (2% + VAT) | about NIS 51,900 |
| Appraiser and fees | about NIS 3,500 |
| Total | about NIS 626,000 |
In other words, in practice you need almost 28.5% of the price, plus a safety cushion for emergencies. You can check your own numbers in the equity calculator (in Hebrew).
What counts as equity?
Savings, a liquid study fund (קרן השתלמות), money from selling a property, and a gift from parents. Banks will ask to see where the money comes from, and sometimes they will ask for a gift letter. A loan you take to "complete" your equity is not equity. The bank will count its repayments as a liability that reduces your repayment capacity.
Not enough equity?
There are a few directions: a discounted apartment under a government program, postponing the purchase and building up savings in an organized way, or buying at a lower price. Most important of all: do not "arrange" equity through expensive loans that will weigh on you for years.