Up until very recently, there were only two banks that allowed taking a mortgage using a power of attorney, meaning the borrower didn’t need to be in Israel to get a mortgage.
Those were Bank Mizrahi-Tefahot and Bank of Jerusalem, that are traditionally more knowledgeable and accommodating towards foreign buyers. They are, subsequently or not, also considered to be the most expensive banks to take a mortgage with.
However, a new interesting player has recently joined the field – Discount Bank. Discount Bank now allows signing from abroad, if at least one of the signers already has an active bank account with their bank. This is especially useful for expats, people on sabbatical abroad, people stuck abroad due to Covid-19 etc. Since Discount Bank is fairly new to the area and lacks the long experience the other two banks have regarding foreigners, there may be some glitches to be expected and the process may take longer. However, the advantage of Discount Bank is that its rates are very reasonable; significantly better than the other banks’.
It’s always good to have more options, especially ones that might be cheaper.
But what happens when a co-signer is needed?
When a couple wants to buy a property in Israel and their current income isn’t high enough to support the mortgage they want, they often turn to co-signers. The problem is that regulations in Israel dictate that co-signers must be next of kin (parents, siblings or children) and that a co-signer may not sign a mortgage with a power of attorney. To make matters worse, banks is Israel, generally speaking, don’t accept co-signers not living in Israel. Many Olim are often faced with a situation of co-signers (usually parents) that may have very substantial and stable income, but are living abroad.
Luckily there are two separate solutions:
1. Up until recently, Mizrahi-Tefahot was the only bank to offer a solution to said problem. This solution separates the roles so that the couple living in Israel is the buyer of the property but the next of kin are the borrowers of the mortgage. This can be done without the borrowers coming to Israel (as stated above) by signing at the consulate or with an apostille and a notary.
2. As of recently, Discount bank has a new policy that does allows for co-signers who don’t live in Israel, without them needing to be the borrowers. The only catch is that the co-signers will have to come to Israel once to physically sign.
One last issue I’m often asked about is taking a mortgage in foreign currency.
There are two banks that offer the option of taking a mortgage in pretty much any currency – Bank of Jerusalem and Union Bank (Igud). Once again, though Bank of Jerusalem has more experience, Union Bank offers much better rates. The other two banks (Discount and Mizrahi-Tefahot) will allow the mortgage to be tied to a foreign currency but the payment will have to be converted to NIS.
To summarize, if a few years ago it was very challenging to buy a property from abroad, today there are many more options at much better rates.