Buying a home in a country with which you are unfamiliar can be challenging, and full of nasty surprises. So at IsraTransfer we have pulled together a warts-and-all guide to the financial aspects of becoming a property owner, to allow you to start the process with all the information that can be useful to you.
The good news is a non-resident can qualify for a mortgage in Israel – although it may be more straightforward to borrow against assets in your home country and act as a “cash buyer” in Israel – particularly if you plan to continue centering your life outside of Israel.
Israeli residents can borrow up to 75% of the value of a property, assuming they earn enough to cover the monthly payments, while non-residents are restricted to 50% of the property price. The price means the valuation for mortgage purposes – not necessarily the advertised, market price. If there is a difference between the two you will need either a higher down payment or to negotiate to make good the difference.
You also need to factor in a further 10 to 12 percent of the purchase price in additional fees that you will pay during the process of becoming a homeowner. Most of these fees are non-negotiable, but since we are in the Middle East, there’s no harm in trying.
These include:
Fees to the agent who showed you the property. These are routinely 2% of the property price, plus purchase tax, and are paid by both buyers and sellers.
Legal fees for the work you will need in order to purchase a property are likely to come in at 0.5 to 1.5 percent of the value. If you are buying a brand new property, you will find you also have to pay something for the builder’s legal fees.
A mortgage arrangement fee – around 1% plus purchase tax, plus the cost of professional valuation.
Whether or not you need a mortgage, you may well want to pay for a professional inspection of the property which will cost NIS 3,000 to NIS 6,000 (roughly between $750 and $1,750) so that you know of any major problems in advance.
Property purchase tax works in bands which are adjusted annually. As a resident you pay lower fees, but as a non-resident currently the rates are 8 percent for purchases up to NIS 6,055,070, and 10 percent beyond that.
When buying a new property, the final cost of the property is not fixed at the time that you commit to it. At present, up to 40% of the cost of a new-build can be linked to what is known as the “Construction Index”, which is updated by Israel’s Central Bureau for Statistics once a month to reflect the generally increasing costs of materials and labor. That increase is then reflected in outstanding payments you make on the property.
Finally it is important also to be aware of the costs to get money from your home country to the person from whom you are buying the property. Banks may charge a commission on the transfer of large sums, and money will need converting into shekels which also attracts fees. IsraTransfer can save you money here by offering better rates than the banks as well as handling the whole process for you.
It may sound complicated and a little daunting, but there are plenty of trustworthy advisors who can hold your hand. It is possible with this help to complete a transaction overseas, and if you go into the process with your eyes open you can work out properly what you can afford so that the process of acquiring the place that you dreamed of can be pain-free.
IsraTransfer can act as your partner to move your money into and out of Israel, offering better exchange rates than banks and a much smoother process. Find out more about us online at www.isratransfer.com
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