How to Buy an Apartment in Israel with a 25% Down Payment: A Guide to

How to Buy an Apartment in Israel with Only 25% of the Cost

Updated: October 28, 2025

IsraRealty Team Real Estate Market Analysis Department

To buy an apartment in Israel with 25% equity, you need to secure a mashkanta (mortgage). Israeli banks provide financing for up to 75% of the property value for first-time buyers. This allows families and young professionals to enter the market with only a quarter of the property's market price.

• Financing Limits: The Bank of Israel allows mortgages of up to 75% for first homes, 70% for "home upgraders," and up to 50% for investors.
• Ishur Ekroni: Preliminary mortgage approval is valid for 24 days and is a mandatory step before signing a contract.
• Appraisal Risk: The bank calculates the loan amount based on a licensed appraiser's (shama'i) valuation, which may be lower than the contract price.
• Tax Benefits: First-time homebuyers are eligible for significant purchase tax (mas rechisha) exemptions within legally established thresholds.

Bank of Israel Rules: Why Exactly 25% Equity?

The Israeli real estate market is regulated by Bank of Israel directives (specifically Directive 329), which set strict Loan-to-Value (LTV) ratios. If you are buying your first and only apartment in the country, your equity must be at least 25%, and the bank can provide financing for the remaining 75%.

Terms differ for other categories of buyers:

• Residents (first home): minimum 25% down payment.
• Home changers (upgraders): minimum 30% down payment (financing up to 70%).
• Investors and non-residents: minimum 50% down payment (financing up to 50%).

It is important to understand that 25% is the base for the apartment's value itself. Additional transaction costs (lawyer, realtor, taxes) must be covered on top of this amount.

Step-by-Step Algorithm: From Idea to Getting the Keys

Obtaining a mashkanta in Israel is a multi-stage process. A mistake at any stage can lead to a last-minute bank rejection or the need to find additional funds.

1. Obtaining Preliminary Approval (Ishur Ekroni)

Before you start looking for an apartment, you must request an "Ishur Ekroni" from the bank. This document confirms that the bank is willing to provide you with a specific mortgage amount based on your income and credit history. The interest rate conditions in this document are typically valid for 24 days.

2. Checking the Property in Registries

Before paying the down payment, you must verify the legal status of the property. The primary document is an extract from the Tabu (Land Registry). If the apartment is registered with the Israel Land Authority (ILA) or with a "hevra meshakenet" (housing company), the verification process becomes more complex and requires legal counsel.

3. Property Appraisal (Shama'i)

This is a critical moment. The bank sends an independent appraiser (shama'i) to the property. The bank lends 75% of the lower of two figures: the price in the contract or the appraiser's valuation. If the appraisal turns out to be lower than the purchase price, you will have to cover the difference with your own capital.

Planning a purchase but unsure about your creditworthiness or the legal status of the property? IsraRealty experts will help conduct a preliminary document audit and select the optimal financing strategy.

Comparison: New Construction vs. Resale

When choosing a type of real estate, it is important to consider the payment schedule and ways to ensure the security of your funds.

Taxes and Additional Expenses

When planning your budget, remember that 25% capital is only part of the required funds. You must also account for:

• Purchase Tax (Mas Rechisha): First-time buyers benefit from reduced tax brackets. Up to a certain amount (updated annually), the tax rate can be 0%.
• Lawyer Fees: Usually 0.5% – 1% + VAT. In Israel, a lawyer is a mandatory participant in the transaction, verifying the contract and the Tabu.
• Realtor Commission: Typically 2% + VAT (often 0% on new builds).
• Appraisal and Bank Opening Fees: Approximately 0.25% of the loan amount plus appraiser fees.

Frequently Asked Questions

Is it possible to buy an apartment in Israel without any down payment?

According to Bank of Israel rules, this is not possible. The minimum down payment for residents is 25%. Banks strictly monitor the use of additional unsecured loans to cover the down payment and may deny the mortgage.

What is an Ishur Ekroni and how long is it valid?

This is the bank's principle agreement to provide a loan. The interest rate parameters are locked for 24 days. If the transaction does not progress within this time, the bank may revise the rates based on market conditions.

Does residency status affect the down payment amount?

Yes. Foreign residents (those without Israeli citizenship or a center of life in Israel) can usually count on financing of no more than 50%, which requires 50% equity.

How does the shama'i appraisal affect the mortgage?

If you buy an apartment for 2 million shekels, but the appraiser values it at 1.8 million, the bank will lend 75% of 1.8 million. You will have to pay the remaining difference (200,000 + 25% of 1.8 million) yourself.

Do I have to pay purchase tax if it is my first apartment?

Israel has a "stepped" tax system. For a first apartment up to a certain threshold (around 1.9-2 million shekels, updated in January), the tax is 0%. For amounts exceeding this, tax is calculated according to a progressive scale.

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Conclusion

Buying an apartment in Israel with 25% equity is a real opportunity to become a property owner using mortgage financing. However, the success of the transaction depends on thorough preparation: obtaining bank preliminary approval, a realistic appraisal of the property, and verifying all legal nuances. Proper planning helps minimize risks and avoid unforeseen expenses when signing the contract.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Lending terms and tax rates are subject to change according to the Bank of Israel and Tax Authority regulations.

Last updated: 10.28.2025