Dr.Haim Katz

Dr. Haim Katz, LL.M. Ph.D
Advocate, Member of the Israel Bar

Can't Obtain Credit In Canada? Have You Tried Israel Lately?

As we all know, Israel is the land of milk and honey. But can we recognize it in its new form as land of milk and money? Because indeed, over the years, the milk and honey has morphed into a substantial industrial base, an economy that exports billions of dollars worth of products worldwide, and a highly developed financial sector.

Combine this with the fact that for many years, around 5% of real estate purchased in Israel was bought by foreign residents, often without mortgages, and you have a very interesting financial opportunity. Combine foreigners who have in total own hundreds of millions of dollars in real estate, together with a banking system which as of yet has not been hit by the raging storms in North America and you have the possibility of providing credit.

The idea is simple: instead of selling your property in Israel because you are short for liquid cash, you may borrow on your property at various rates of interest.

We asked Dr. Haim V. Katz, an attorney who came to Israel with his family from England 25 years ago, whether the banks will really lend to foreign residents.

The good news, says Katz, who is a partner in one of the top Israeli law firms dealing with real estate and who specializes in servicing foreign clientele, is that if you know your way around within the Israeli banking world, there are specific departments that are willing to lend, even generously, and for long periods.

Katz, author of the well known book Buying Your Home In Israel, (which has now been made available as an e-book on the website) adds a caveat:

"Not every bank will lend to foreign residents. Even Israel, which has survived the worst parts of the crisis because of the highly regulated fiscal environment imposed by the Bank of Israel, nevertheless feels the chill. Some banks, even mortgage banks, refuse point blank to lend to people from outside of Israel."

"There are banks that are willing to lend foreigners on the strength of their real estate assets, long term loans of 15-20 years at fixed interest rates. It is also possible to borrow very short term, such as a year or two, which would help those who are asset-rich but cash-poor."

So how do you go about it?

The first question to answer is, of course, what asset do you own and how much is it worth? Not long ago, even a few months ago, you could obtain a mortgage for 85% of the value of the property. The market was hot and banks were crowding to get in on the great lending fest. This now seems like centuries ago but even in this atmosphere, says Dr. Katz, depending on your credit rating and the location of your real estate, you can get a loan for 65% of value.

The next stage is to be personally introduced to a willing bank. World over, banks like to know their clients and they require references and as much information as possible on the potential borrower. But much of the red tape can be cut if the bank feels comfortable with the potential borrower, something that may be achieved through personal connections.

Can you borrow in your local currency? Again, the good news is that you can borrow in American, Canadian, European and British currencies.

So, in an amazing reversal of roles Israel has become a powerful cash reservoir for many Diaspora Jews in a time of a cash crunch.