A mortgage is a long-term loan that a bank gives against a lien on an apartment. For most people it is the largest financial commitment they will ever make, for twenty or thirty years. The good news: once you understand a few simple principles, the process becomes far less intimidating.
What is an Israeli mortgage made of?
An Israeli mortgage is not a single loan. It is built from several tracks (מסלולים), and each track has its own type of interest rate:
- Prime – an interest rate that moves together with the Bank of Israel rate. Read more about the prime track
- Fixed, not linked (קל"צ) – the monthly payment is known in advance for the whole period. More (in Hebrew)
- Fixed, linked to the CPI (ק"צ) – the rate is fixed, but the principal is adjusted to the Consumer Price Index. How CPI linkage works
- Variable (for example every 5 years) – the rate is reset at fixed points according to an anchor. More (in Hebrew)
The combination of tracks is called the mix (תמהיל), and it is the heart of the mortgage. A good mix balances a comfortable monthly payment, a reasonable total cost and a level of risk you can live with. How to build a mortgage mix
The Bank of Israel's basic rules
Israeli banks work under Bank of Israel directives (Directive 329). The most important ones:
| Topic | The rule |
|---|---|
| Financing for a single (only) apartment | Up to 75% of the property value |
| Replacement apartment (upgrading) | Up to 70% |
| Additional apartment / investment | Up to 50% |
| Payment-to-income ratio | Not above 50% |
| Fixed-rate component | At least one third of the mortgage |
| Maximum term | 30 years |
Full details: Bank of Israel financing limits.
How the process works, step by step
- Self-check – how much equity you have, how much you earn, and which monthly payment is truly comfortable for you.
- Approval in principle (אישור עקרוני) – you approach several banks and receive initial offers.
- Comparison and negotiation – compare not only the interest rate but also the mix, fees and conditions.
- Signing the purchase contract – preferably only after you have an approval in principle.
- Appraisal, insurance and documents – the bank sends an appraiser, and you arrange life and building insurance.
- Signing at the bank and the transfer of funds – the bank pays the seller according to the payment schedule in the contract.
Three beginner mistakes
- Looking only at the interest rate. A low rate on one track does not mean the whole mortgage is cheap.
- Stretching the payment to the limit. The bank may approve it, but life also includes children, a car and changes in income.
- Going only to your own bank. Competition between banks is the strongest tool you have.
What next?
If you are just starting out, try the "How much mortgage can I get" calculator (in Hebrew) and the equity calculator (in Hebrew). After that, it is worth sitting down with someone who does this every day. That is exactly the role of a mortgage advisor.