Refinancing an Israeli Mortgage as a US Borrower
Refinancing an Israeli Mortgage as a US Borrower
Circumstances change after a purchase. Rates move, income rises or falls, a family decides to stay in the United States longer than planned or to move to Israel sooner. For owners with an Israeli mortgage, refinancing, known locally as michzur, is one way to adapt the loan. It can mean moving the loan to another bank, changing the mix of tracks with the same bank, or paying down part of the balance. Unlike many US refinances, an Israeli refinance often involves early repayment fees on certain tracks, and the calculation is not always intuitive. This guide explains the main considerations for American borrowers.
Reasons Borrowers Refinance
Common motivations include reducing the overall cost of the loan, lowering the monthly payment, moving away from tracks linked to inflation, shortening the term or releasing equity. For Americans, a change in residency status or income currency can also prompt a review.
Write down what you want to achieve before speaking to any bank. Being clear about your goal is the first step, because a refinance that lowers the monthly payment may raise the total cost over time, and the reverse.
Early Repayment Fees in Israel
Israeli banks may charge an early repayment fee on certain tracks, particularly fixed-rate tracks, when the rate environment has moved in a way that causes the bank a loss. Tracks linked to the prime rate or variable tracks at their reset points often carry lower or no such fees.
The fee depends on the specific track, the time elapsed and market rates at the moment of repayment. Ask the bank for a written statement of the fee before making any decision.
Changing Tracks Versus Changing Banks
Sometimes the most efficient move is to renegotiate with your current bank, which may offer to adjust the track mix to keep your business. In other cases another lender offers better terms that justify the costs of moving.
A mortgage advisor can obtain competing offers and compare the full picture, including fees, insurance changes and the time needed.
Written early repayment statement from the current bank
A new appraisal of the property
Updated income documents from the United States
Revised life and structure insurance assigned to the new lender
Appraisal and Current Value
A refinance with a new bank usually requires a fresh appraisal. If the property value has risen, the new loan may allow more flexibility. If it has fallen, or if the building has unresolved legal issues, the new lender may offer less. Buildings that have entered an urban renewal process can also raise questions for a new lender, since the apartment may be demolished and rebuilt during the loan term. Your lawyer can provide the documents the bank will ask for.
Partial Prepayment as an Alternative
Owners who have received a bonus, sold another asset or accumulated savings sometimes choose to repay part of the loan rather than refinance it entirely. Choosing which track to prepay can make a noticeable difference to both fees and future payments. Banks usually require advance notice of a prepayment, and the fee is calculated as of the actual repayment date, so coordinate the timing carefully with the branch or your advisor.
Currency and Timing for Americans
If you are prepaying with dollars, the exchange rate at the time of conversion affects how much of the loan you can clear. Transfers should be planned so that funds arrive in the Israeli account before the date set with the bank. Your US CPA should also know about any repayment, since changes to a foreign currency loan can have US tax implications.
Getting Proper Advice
Refinancing combines banking, legal and tax elements. A mortgage advisor handles the loan comparison, your Israeli lawyer takes care of the lien registration, and your tax advisors in Israel and the United States review any consequences. We are not financial advisors, but we can help you gather the property information the process requires.
Frequently asked questions
Can I refinance while living in the United States?
Many banks will consider it, applying their foreign resident criteria. Some signatures may need to be completed at a consulate or before a notary.
Will refinancing always save money?
Not always. Fees, insurance changes and the new track mix can offset savings. A careful comparison is essential.
How often can I refinance?
There is no fixed rule, but each refinance involves costs, so most borrowers do it only when the benefit is clear.
Does refinancing change my insurance?
The life and structure policies must match the new loan and be assigned to the new lender, so they usually need updating.
Elkayam Group
Elkayam Group, trading as Kobi Elkayam Real Estate Ltd on Rival Street 37 in Tel Aviv, is a third-generation family company whose beginnings in industry go back to the forties. It concentrates on development, urban renewal, TAMA 38, pinui-binui and combination deals, and can call on partner companies that provide guarantees for complex transactions. The team works in Hebrew, English and French and understands the long relationship American owners have with their Israeli property.
Contact us if you want to revisit the financing of a property you already own in Israel.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv