Mortgage for a New Apartment: A Guide

How a New-Build Mortgage Is Different

When you buy a second-hand apartment, the mortgage is usually transferred in one payment at closing. Buying from a developer looks different: payments are made in stages, according to a payment schedule set in the contract and tied to construction progress. The mortgage follows the same pattern — the bank releases the amount needed for each upcoming payment, directly through the project's payment voucher.

This has several important implications: interest accrues only on the amounts already drawn rather than on the full loan, the loan accompanies you throughout the construction years, and your track mix should account for the full timeline. In most cases the bank will also require you to pay in your own equity first, with mortgage drawdowns starting only afterwards — one more reason to plan your cash flow in advance.

Pre-Approval Comes First

A pre-approval (ishur ekroni) is the bank's preliminary confirmation of the amount it is willing to lend you, based on your income, obligations and the property details. It is worth obtaining before you sign the purchase contract — that way you know the deal is financeable before you commit, and you can negotiate from a position of confidence.

Note that a pre-approval is valid for a limited period and can be renewed, and it is not a final commitment — full approval comes only after an appraisal and document checks. When buying off-plan, tell the bank explicitly that this is a developer purchase with staged drawdowns, so the offer you receive matches the real structure of the transaction.

Equity and the Bank of Israel Limits

A mortgage never covers the full price of the apartment, and the Bank of Israel sets financing caps by buyer type. As of today, under Bank of Israel directives: sole-residence buyers can receive financing of up to 75% of the property value, upgraders selling their existing home — up to 70%, and buyers of an additional or investment apartment — up to 50%. These caps have been stable for many years, but always verify the directives in force with your bank.

Buyers who are not Israeli residents are generally subject to the lower cap, similar to investment buyers, and each bank has its own policy on recognizing income from abroad — so clarify this early. And remember: the cap is a ceiling, not a promise. The amount you actually receive depends on your repayment capacity, and the bank works from the lower of the contract price and the appraiser's valuation.

Mortgage Tracks: The Mechanisms in Brief

An Israeli mortgage is almost always built as a mix (tamhil) of several tracks, which differ in how the interest rate behaves and whether the principal is linked to the consumer price index. These are the main mechanisms — without numbers, because rates change all the time:

• Fixed unlinked rate — the payment is known in advance for the life of the loan. Maximum certainty, usually at a higher starting price.
• Fixed CPI-linked rate — the rate is fixed, but the principal is linked to the consumer price index, so the balance and the monthly payment can rise with inflation.
• Prime track — the rate derives from the prime rate and moves with it. Flexible, usually with no early-repayment fee, but exposed to rate changes in the economy.
• Variable rate with reset points — the rate updates at preset intervals, in linked and unlinked versions.

Grace Periods and Interest During Construction

Because the money is drawn gradually, during construction you pay only on the portion already drawn. Banks offer different arrangements for this period: partial grace — paying interest only, with no principal repayment, until key handover; and full grace — deferring all payments, with the accrued interest added to the principal and increasing it.

These arrangements are a real relief for buyers paying rent in the meantime, but they have a cost: every deferral increases the total cost of the loan. This is not a question of good or bad but of cash flow — weighing what is comfortable today against what pays off over time.

The Apartment Price and the Building Inputs Index

A point that surprises many buyers: entirely separate from the mortgage, in most developer purchase contracts the unpaid balance is linked to the Building Inputs Index. If the index rises, your remaining balance to the developer grows accordingly — meaning the later a payment is scheduled, the greater your linkage exposure. This is a different linkage from the CPI linkage of your mortgage, and the two should not be confused.

There is a genuine planning decision here: paying earlier reduces exposure to the Building Inputs Index, but starts your mortgage interest earlier — and the right calculation differs from deal to deal. Some developers agree in negotiation to cap the linkage or waive it on part of the payments, so review the linkage clause in the contract carefully, together with your lawyer and mortgage adviser.

How to Compare Banks

Rates and terms vary from bank to bank, and sometimes from branch to branch — which makes genuine comparison worth real money. Get pre-approvals from several banks, use one bank's offer as leverage in negotiating with another, and look beyond the monthly payment: what really matters is the total repayment over the life of the loan.

• Ask for offers on exactly the same track mix — otherwise the banks cannot be compared.
• Check the side costs: file-opening fees, appraisal, life insurance and structure insurance.
• Ask about the early-repayment mechanism in each track — it determines how much flexibility you will have later.
• Our free mortgage calculator at /en/mortgage lets you simulate mixes and scenarios before your bank meetings.

Before You Decide

This guide explains mechanisms in general terms; it is not financial or legal advice and not a recommendation for any particular track. Rates, directives and terms change — you will find current figures on the Bank of Israel website and at the banks themselves, and a decision on your mix is best made with a qualified mortgage adviser who knows your personal situation.

You are welcome to browse our new projects at /en/projects or schedule a call with the team. At Way To Israel we accompany buyers personally from choice to key handover — over five years of activity, hundreds of satisfied clients, and no broker fee for the buyer.