Mortgage refinance in Israel: when it pays off and how it works

An Israeli mortgage is split into tracks (מסלולים), each with its own rate, linkage and exit cost:

Tracks in detail, in Hebrew: mortgage tracks guide. This guide in Hebrew: גרסה בעברית.

A refinance (מחזור משכנתא) is a new housing loan that repays all or part of your existing one, for a lower rate, a better mix, a payment that fits your cash flow or a shorter term.

When today's rate is meaningfully lower than yours, an exit point is near, or your family's finances have changed. "Meaningfully" means the gap recovers the costs in reasonable time, which depends on the balance and years left, not on one magic percentage. Other triggers: higher income that lets you shorten the term, or more CPI or prime exposure than you want.

According to the Bank of Israel, about 69,000 mortgages worth about ₪43.6 billion were refinanced in 2025, about 7% of the banks' mortgage portfolio, against an average of about 4.5% in 2019–2024. Refinancing came on average 40 to 50 months after the loan was taken, close to the anchor update on variable tracks.

The Banking Order (Early Repayment of a Housing Loan), 2002 (צו הבנקאות (פירעון מוקדם של הלוואה לדיור)) sets several components. Not all apply to every track.

Source: the order, sections 3–6 and 10, and the Supervisor of Banks' position on a single operational fee (13.9.2021). Checked 16.10.2026.

The interest-differential fee usually decides

The bank discounts your remaining payments at the average rate the Bank of Israel publishes monthly for similar loans; if it's below your rate, the difference is the bank's "loss". Two protections apply. The bank also calculates against the average rate on the day the loan was granted (on variable tracks, the last rate change) and charges the lower result. Per the Bank of Israel, this neutralizes the borrower's risk component, so an above-average rate you were originally charged shouldn't inflate the fee. And there's an age discount (section 8):

A supplementary loan (הלוואה משלימה) is bank money lent to someone entitled to a government-directed loan, such as an eligibility mortgage, in addition to it and for the same purpose. The paradox: when rates fall, fixed tracks can carry a high fee.

Illustration of the principle (not the binding formula): a fixed, unlinked track, ₪300,000 left over 15 years at 5% (payment about ₪2,372), granted 4 years ago, assuming the comparison with the average rate on the grant date isn't lower. At a published average of 4%, the remaining payments are worth about ₪320,700: a loss of about ₪20,700, or about ₪16,600 after the 20% discount. At 4.5%, the loss would be about ₪10,100 before the discount. The binding amount is only in the bank's report.

Prime, variable tracks and loans with no fee

If rate change dates aren't known in advance, or the rate changes yearly or more often, no interest-differential fee is allowed; that's usually prime. On variable tracks, repaying at the exit point costs only the operational fee, and in between the fee runs only to the next change date. Government-directed loans (הלוואה מוכוונת) carry no fee (section 2); per Kol Zchut, with Ministry of Construction and Housing assistance that covers only the subsidized loan, not the bank mortgage beside it.

The new loan has its own costs, usually higher in an external refinance.

• File opening, per the bank's tariff. The approval in principle comes before any charge, so you can compare first (Directive 451).
• Appraisal, only if the loan requires one, at the lower of actual cost and tariff, with a copy for you. A bank won't unreasonably refuse another bank's appraisal under 90 days old by an appraiser on its list (Directive 451).
• Registering the new mortgage and deleting the old one; per Kol Zchut, a deletion the bank handles after full repayment is at its cost.
• Life and building insurance pledged to the new bank, with no gap in cover, and an advisor's fee if you use one (in Hebrew: what mortgage advice costs).

The bank must hold the approved terms for at least 24 days from the approval in principle (12 if no new registration is needed), so plan the repayment inside that window (Directive 451).

Break-even = total refinance costs ÷ monthly saving. If you'll keep the mortgage well beyond that many months, refinancing makes sense; also compare total payments to the end. Example 1 on this page pays off unless you stretch the term. Example 2 never does:

Example 2: ₪250,000 left over 6 years (72 months) at 5.0%; offer 4.7% with ₪3,000 in costs. The payment drops from about ₪4,026 to about ₪3,992, saving about ₪35 a month, or about ₪2,500 over 72 months, less than the costs. Break-even: 3,000 ÷ 35 = about 86 months, longer than the time left.

Test your numbers from the balance report in the refinance calculator (in Hebrew). It assumes equal monthly payments (the Spitzer schedule, לוח שפיצר), a fixed rate and no CPI linkage, so with linked or prime tracks the result is a direction, not a forecast. Full schedule: the monthly payment calculator (in Hebrew).

When the costs exceed the saving within the time you'll keep the mortgage, or the saving comes only from a longer term. According to the Bank of Israel, about 15% of refinances extended the term and raised the total expected interest.

• Few years left and a small rate gap (Example 2).
• A capitalization fee that wipes out the saving, typically on fixed tracks taken when rates were higher.
• A lower payment that comes only from extending (Example 1, third column), or a sale before break-even.
• Moving from fixed to prime: a lower payment now, traded for the risk of rising rates.
• Adding money to the loan, which is new borrowing against your home (in Hebrew: loan consolidation guide).

Important: the fee changes with each month's published average, so decide only on a fresh balance report.

1. Get a current balance-for-repayment report and map each track: balance, rate, linkage, years left, next exit point. Under Directive 451 the bank shows the balance online; otherwise you can request it in writing, with no fee up to twice per calendar year.
2. Ask several banks for offers. The approval in principle shows the proposed mix, uniform comparison mixes, the total expected interest rate and total expected payments (Directive 451). For a general rate picture: the Bank of Israel's "Equator" (קו המשווה, in Hebrew).
3. Compare total payments and break-even against how long you'll keep the mortgage.
4. Time it: written notice 10 to 45 days ahead, linked tracks from the 16th, exit points, the approval's validity. In an external refinance the new bank should offer to pass the notice on (Directive 451).
5. Close and confirm: a release confirmation within five business days (Directive 451), a request to delete the lien within 30 to 60 days (Kol Zchut), and a breakdown of fees actually charged within 60 days (section 12 of the order).