Financing through a company
Just like in America, it is possible for you to buy a property either as a private individual, or through a corporation. In this section we will focus on the bank loans granted to companies by Israeli banks but also on the financial engineering that gravitates around these loans.
Financing for a company – Bank Requirements
In this case, the financing will not be considered a real estate loan, but a business loan, which results in slightly higher rates than in the first case. In fact, banks consider such funding to be more risky, in accordance with the regulation of BCI (Central Bank of Israel).
Moreover, the collateral requirements required from banks by the BCI are more stringent, particularly for mortgage collateral funds (funds that the bank must block in order to secure the loan and that therefore cannot be assigned to any investment whatsoever) are higher than they are for a conventional home loan.
In addition, Israeli banks do not require the entity to necessarily be Israeli; thus, a American company could apply for a loan from an Israeli bank.
Note that regardless of the « nationality » of the company, the bank will have to ensure that the statutes of the latter allow the purchasing of real estate.
Financing a company – Financial Engineering
Although somewhat more expensive in terms of rates, a loan contracted by a corporate entity has many advantages in terms of financial engineering.
This is just a reminder that according to the regulations of the BCI, an Israeli first-time buyer will qualify for a bank loan of up to 75% of the property value, and 50% for a second property; a non-Israeli citizen may benefit from a bank loan of up to 50% of the value of the property, whether it is his first, second, or subsequent acquisition.
These financing percentages correspond to the provision of a single mortgage collateral to the lending bank.
Moreover, an Israeli may compose his loan as follows:
– Up to 1/3 in variable rate
– At least 2/3 in fixed rate.
It is open to a non-Israeli citizen to compose his loan however he wants, whether it be 100% variable or fixed interest rate, or different proportions of each formula.
When it comes to financing an acquisition by a corporation, there is no limitation on percentage or choice of formula; each case is different and will be presented in the best way possible to the banks!
The tax issue will not be addressed in this section, since it is not related to the financing and it is recommended to turn to a tax specialist for these matters.
However, investing through a company avoids the costs that may arise from the distribution of dividends for an acquisition as a private individual.
Financing a company – our brokerage firm
After a preliminary interview, you will be required to submit documents necessary to establish your profile and to present your loan application file to Israeli banks.
Once these documents are made available, we substitute ourselves to you in all the steps up to the disbursement of funds, thus ensuring you:
– Of getting the optimal formula
– In the form of a loan that suits you
– With the best rate
– Insuring your peace of mind
– With the availability of dedicated advisors, who are familiar with your profile and your expectations.