Mortgage in Israel for Foreign Residents: A Practical Guide

For many families abroad, owning a home in the Land of Israel is more than a property deal. It's a place for the holidays, a base for the kids when they come to study, or the first step toward aliyah. You can make that dream happen from overseas. You just need to know, before you start, how Israeli banks and the Tax Authority look at a buyer who lives outside the country.

This guide sets out the rules as they appear in the official sources, with the date each fact was checked and worked examples in real numbers. The goal is simple: walk into the bank with a plan, and find any surprises before you sign. All amounts are in shekels (₪). Exchange rates move every day, so convert at the current rate when you plan.

גרסה בעברית

Who counts as a "foreign resident" when buying in Israel?

There are two different tests, and it pays to keep them apart. The bank asks whether you are an "Israeli citizen" under a specific legal definition. The Tax Authority asks whether you are an "Israeli resident", meaning whether your center of life is in Israel.

For the mortgage: Bank of Israel Directive 329 defines a "foreign resident" (toshav chutz) as "anyone who is not an Israeli citizen". The directive borrows its definition of "Israeli citizen" from section 16A(a), paragraphs (1) to (1B), of the Land Taxation Law. As that section is worded, the definition covers: anyone registered in Israel's population registry or required to be registered there; an individual who is an Israeli resident; and anyone entitled to immigrate under the Law of Return who is a resident of "the Area" (Judea and Samaria). In its official Q&A, the Bank of Israel says it does not interpret those definitions and adopts them as written (Q&A 1.2).

For purchase tax: the question is whether you are an "individual Israeli resident". This is usually assessed with the center-of-life test from the Income Tax Ordinance: your permanent home, where your family lives, where you work and where your economic interests are. The Ordinance also has day-count presumptions, such as spending 183 days or more in Israel in a tax year (Kol Zchut, checked 16.10.2026). If your situation isn't clear-cut, check it with your lawyer.

What this means in practice: Israelis who live abroad but are still listed in the population registry appear to fall within the definition of "Israeli citizen", even if they count as non-residents for purchase tax. But the 75% cap also requires the apartment to meet the "sole apartment" definition the directive refers to, so it's important to find out in advance how the bank will classify you. On the other hand, eligibility under the Law of Return on its own, without aliyah and without living in the Area, is not part of the definition. A buyer who is neither listed in the population registry nor an Israeli resident will usually fall under the stricter rules on both tests. So your first step is to ask the bank, and a lawyer if needed, how you will be classified under each test.

Question	Bank test (loan-to-value)	Tax test (purchase tax)
What is checked	Whether the buyer is an "Israeli citizen" as defined in section 16A(a) of the Land Taxation Law	Whether the buyer is an individual Israeli resident, meaning their center of life is in Israel
Who counts as "foreign"	"Anyone who is not an Israeli citizen" (Directive 329, section 1)	Anyone whose center of life is outside Israel
Result	Investment apartment, financing up to 50%	Additional-apartment rates: 8% and 10%
What can change it	How the bank classifies you under the legal definition	Moving to Israel within two years (first-time resident or veteran returning resident), or the olim benefit

How much can a foreign resident borrow?

Up to 50% of the property's value, if you are not an "Israeli citizen" under the directive. The Bank of Israel says so explicitly: a purchase by a foreign resident is "necessarily defined as an investment apartment, and the maximum financing rate for it is 50%" (Q&A 2.4 to Directive 329, our translation).

The loan-to-value ratio (LTV) is the loan amount divided by the property's value. Fifty percent is a ceiling, not an entitlement. The bank also looks at your ability to repay and at the deal as a whole, and it can approve less.

Rule	What it says	Source (checked 16.10.2026)
LTV cap for a foreign resident who is not an "Israeli citizen"	50% (investment apartment)	Directive 329, section 2.3; Q&A 2.4
LTV cap for an Israeli citizen's sole apartment	75%	Directive 329, section 2.1
LTV cap for a replacement apartment	70%	Directive 329, section 2.2
Payment-to-income ratio	Up to 50%. Above 40% the bank must hold more capital, so banks tend to be stricter	Directive 329, sections 5–6
Variable-rate share	Up to 66.66% of the loan. The bank may choose not to apply this limit to foreign-currency or currency-linked loans to a foreign resident	Directive 329, sections 7 and 12.3
Maximum term	Final repayment within 30 years at most	Directive 329, section 8
Earlier loans on the same apartment	Counted together with the new loan inside the cap	Directive 329, section 4

Buying with a relative who is classified differently? According to the Bank of Israel, if you count as separate buyers for tax purposes, the bank can treat you as separate borrowers. The cap is then a weighted average based on each buyer's share (Q&A 2.19). For example, a 50/50 split between one buyer eligible for 75% and another limited to 50% gives a cap of 62.5%.

Income earned abroad: for a foreign resident whose income is irregular, or whose documents raise questions, the Bank of Israel says the bank may rely on signed returns filed with the tax authorities in the country where the borrower lives (Q&A 4.4). To see roughly how much your income supports, try the mortgage amount calculator (in Hebrew).

How much purchase tax does a foreign resident pay?

Anyone who is not an individual Israeli resident pays the additional-apartment rates: 8% on the part of the value up to ₪6,055,070 and 10% on the part above it. There is no tax-free band like the one sole-apartment buyers get, so tax starts from the first shekel (Kol Zchut, as of 16.10.2026; the page lists these rates as valid until 10.02.2027).

If you move to Israel within two years: under Tax Authority execution instruction 2/2026, an individual counts as an "Israeli resident" for the sole-apartment rates if, within two years of the purchase, they became an Israeli resident for the first time, or a veteran returning resident as defined in section 14(a) of the Income Tax Ordinance. Israelis returning after a shorter time abroad should check with their lawyer whether the rule covers them.

Because of the war, for purchases whose two-year window overlapped 28.02.2026–31.05.2026, the deadline was extended by three months, and in any case to no earlier than 31.08.2026 (execution instruction 2/2026). How and when to ask for the tax to be recalculated after you move is something to settle with your lawyer at the contract stage.

Planning aliyah? New immigrants have a separate benefit. According to Kol Zchut, it covers purchases from one year before aliyah up to seven years after. Olim who arrived on or after 15.08.2024 and buy a sole apartment priced up to ₪20,183,565 pay 0% up to ₪1,978,745, 0.5% up to ₪6,055,070 and 8% above that. The benefit can be used only once. For a purchase made before aliyah, it generally applies only if you make aliyah within a year of buying (a special rule applies to apartments still under construction) (Kol Zchut, checked 16.10.2026).

Track (₪3,000,000 apartment)	Calculation	Purchase tax
Foreign resident (additional-apartment rates)	3,000,000 × 8%	₪240,000
Israeli resident's sole apartment	0 + (368,295 × 3.5%) + (652,960 × 5%)	₪45,538
Oleh (arrived on or after 15.08.2024), sole apartment	(3,000,000 − 1,978,745) × 0.5%	₪5,106

This table is for illustration only. Run your own numbers in the purchase tax calculator (in Hebrew) or in the Tax Authority's official simulator.

Worked example: a ₪3,000,000 apartment. How much cash do you need?

Well over half the price. On top of the 50% the bank won't finance, you pay the purchase tax and the transaction costs out of your own pocket.

One more thing: according to the Bank of Israel, the property value used for the cap cannot be higher than the lower of the appraisal and the price in the purchase contract (Q&A 2.17 to Directive 329). If the appraiser values the apartment at only ₪2,800,000, the cap is 2,800,000 × 50% = ₪1,400,000, not ₪1,500,000, and you will have to cover the gap yourself.

Earning in dollars, paying in shekels: what's the currency risk?

You're exposed to the exchange rate. On a fixed shekel track, your payment in shekels stays the same, but the amount you convert from your own currency each month rises and falls with the rate. The same logic applies to euros, pounds or any other currency.

What can you do about it?

• Run a bad-case scenario. Check your payment at a rate 10–15% below today's and make sure the budget still works.
• Keep a shekel buffer covering a few months of payments, so you're not forced to convert when the rate is against you.
• Understand the foreign-currency-linked track. According to Kol Zchut, this loan is paid in shekels but linked to the exchange rate of a given currency. It is exposed to exchange-rate moves and may suit borrowers whose income is in foreign currency. If you plan to move to Israel and earn in shekels, the risk flips. Not every bank offers this track, so ask whether it's available and on what terms.

For a full explanation of the tracks, see our guide to mortgage tracks (in Hebrew). You can test combinations in the mortgage mix calculator (in Hebrew).

What documents will the bank ask for?

Broadly, the same things any borrower provides: identity, income, down payment and existing debts. The difference is that they come from the country where you live, and some may need translation and certification.

• Identity: your passport, plus an Israeli ID card if you have one.
• Income: pay slips and an employer's letter. If you're self-employed, tax returns. The directive looks at income that is received regularly and is documented.
• Bank statements showing the income actually coming in.
• Source of the down payment: where the money comes from, such as savings, a property sale or a family gift. Expect questions about this as part of the bank's standard checks.
• Existing debts: any mortgage or loans abroad, and a credit report from your country if the bank asks.
• Translation and certification: a public document from a country that is party to the Apostille Convention is usually certified with an apostille. According to Israel's Ministry of Foreign Affairs, documents from countries that are not party to the Convention must be authenticated as foreign public documents. The bank will tell you which documents need translating and certifying.

Can you buy an apartment in Israel without being here?

Yes, with an Israeli lawyer acting for you, a properly certified power of attorney and an Israeli bank account. That lets you sign, pay and register your rights while you're abroad.

An Israeli lawyer

Your lawyer checks the property's title and the contract, files the purchase report with the Tax Authority and handles registration. When there's a mortgage, the lawyer also coordinates registering the bank's lien. Choose a lawyer who knows deals with foreign residents, and get the fee quote in writing.

Power of attorney

A power of attorney lets someone in Israel, usually your lawyer or a relative, sign on your behalf. According to the Ministry of Foreign Affairs, notarial certification at an Israeli mission is done only in the physical presence of a diplomatic or consular officer, and missions don't draft legal documents. The alternative is a local notary plus an apostille. Agree on the wording and the certification route with your lawyer and the bank in advance, and ask the bank whether it requires its own form.

An Israeli bank account

Your down payment, the payments to the seller and the monthly mortgage payments will all go through this account. Expect requests for ID, a tax-residency declaration and questions about the source of funds. Open it early. International transfers take time, and you don't want to discover a delay on the day a payment to the developer is due.

What else does the bank require? Appraisal and insurance

A bank-appointed appraiser will value the apartment, and you'll need life insurance and building insurance. Both are standard for every mortgage in Israel, including for residents.

• Appraisal: the appraisal acts as a ceiling on the value the LTV cap is measured against. If it comes in below the purchase price, the cap is calculated on the appraisal. Ask for a copy of the report and check that its details are correct.
• Mortgage insurance: according to Kol Zchut, mortgage insurance is made up of life insurance and building insurance, and the bank may require it as a condition of the loan. You can buy it through the bank's insurance agency or from another insurer. The bank may reject a policy that doesn't meet its requirements and then insure you itself. If you live abroad, ask in advance whether the insurer has special underwriting conditions.

Step by step: how does buying from abroad work?

1. Feasibility check: how the bank and the Tax Authority will classify you, how much you can put down, and the expected purchase tax.
2. Bank account and documents: open an Israeli account and gather documents, including translations and apostilles.
3. Approval in principle: from more than one bank, before you sign a contract.
4. Choose the property and do legal due diligence: your lawyer checks the property, and you sign in person or by power of attorney.
5. Purchase tax: reported and paid through your lawyer.
6. Appraisal and insurance: the appraisal, policies that meet the bank's requirements, and final approval.
7. Signing and drawdown: sign the loan documents, register the lien, and the money goes to the seller.
8. After the purchase: if you move to Israel within the set period, check with your lawyer about recalculating the purchase tax.

What should you check before you sign?

• How the bank classifies you under Directive 329: Israeli citizen or foreign resident? In other words, 75% or 50%?
• Whether you count as an Israeli resident for purchase tax, and whether you plan to move to Israel within two years.
• If you're planning aliyah: how the timing of your purchase affects the olim benefit.
• How much cash you really need: the part the bank won't finance, plus purchase tax and transaction costs.
• At what rate, and by what method, the bank converts your income into shekels.
• What your payment would be in your own currency if the rate fell by 10%.
• Which power-of-attorney wording the bank and your lawyer will accept, and how to certify it where you live.
• Whether the insurance policies you chose meet the bank's requirements.
• If you plan to rent the apartment out: your tax obligations in Israel and in your home country. Check these with a tax adviser.

What should you watch out for, and when doesn't it fit?

Most mistakes come from assuming the rules work like they do for local buyers. These are the moments to stop and recalculate:

• Signing a contract before approval in principle. If the bank approves less than you planned, you'll have to cover the gap yourself.
• Budgeting for 50% only. A foreign resident's purchase tax starts from the first shekel. In our example it added ₪240,000.
• Planning on today's exchange rate. A mortgage runs for 20 to 30 years, and currencies move.
• Assuming an Israeli living abroad and a foreign resident are the same thing. Under the bank test and the tax test, the answer can differ.
• Leaving the power of attorney to the last minute. Certification and courier time add up, and the deal waits in the meantime.

And to be honest about it: if your savings don't cover 50% of the price plus purchase tax, it may make more sense to choose a less expensive apartment, or to wait. If you plan to move to Israel soon, check whether you would meet the sole-apartment conditions after the move. That could mean a higher financing cap and lower tax brackets.

Wondering what professional guidance involves and when it's worth the cost? Read our guide to mortgage advice costs (in Hebrew).

Frequently asked questions

This article is general information. It is not a substitute for a personal review, legal advice or tax advice.

This article is general information, correct as of October 2026. It is not personal advice, an offer or a commitment; actual terms are set by the bank and depend on your details. Examples are illustrative.