Many Israelis who are considering investing in real estate in Cyprus encounter a fundamental question: Should they take out a local mortgage in Cyprus or finance the transaction through a mortgage or loan in Israel? To make an informed decision, it is important to understand the fundamental differences between the two markets – in terms of financing percentages, interest terms, repayment periods, types of collateral, and even aspects of currency and taxation.
Financing percentages
In Israel, mortgages are usually granted for up to 75% of the value of the property, depending on its purpose (first, second or investment home). In contrast, in Cyprus, financing for foreign buyers – including Israelis – usually ranges from 60% to 70% of the value of the property. This means that higher equity is required in Israel for an investment home, while in Cyprus, despite the limitation on financing percentages, the relatively low prices allow for a deal to be entered into with a more moderate initial amount.
Interest terms
In Israel, mortgage interest rates are directly influenced by the Bank of Israel interest rate, and are usually considered higher than in Cyprus, especially in recent years of interest rate increases. In Cyprus, interest rates are pegged to the euro and sometimes fixed or variable rates with lower spreads are offered. For example, you can find offers around 3%–4% for short or medium periods, compared to interest rates of 5% or even more in Israel. This difference directly affects the amount of the monthly repayment and the profitability of the investment.
Repayment periods
In Israel, it is customary to take out mortgages for periods of up to 30 years. In Cyprus, however, banks often limit the period to only 15–20 years. This means that the monthly repayment in Cyprus may be higher because the payments are spread over fewer years, but the total accumulated interest is lower.
Types of collateral
In Israel, the mortgage is registered as a pledge on the purchased property and sometimes additional guarantees or life insurance are also required. In Cyprus, the main security is the property itself, and sometimes additional documents will be required to prove repayment capacity such as payslips, tax returns or income certificates. The procedure may be faster in some cases, but requires careful order and submission of all documents in full.
Currency issues and impact on refund
In Israel, repayments are made in shekels, while in Cyprus, repayments are made in euros. This means that the Israeli borrower is exposed to changes in the exchange rate between shekel and euro. If the shekel weakens against the euro, the monthly repayment may become more expensive in shekel terms. On the other hand, rental income in Cyprus is usually accrued in euros, so a natural balance can be created between income and repayment.
Related costs
The mortgage in Israel includes familiar costs such as opening a file (up to 0.25% of the loan), an appraiser and insurance. In Cyprus, in addition to bank fees, there are also additional costs such as registration in the land registry, document translation and fees specific to local banks. It is important to take into account all of the associated costs when making a true comparison between the two options.
Advantages and disadvantages of each market
In Israel, the advantage is stability, clear regulation, and high transparency with banks. In Cyprus, the main advantage is lower interest rates and the ability to obtain a loan directly against the property in Cyprus, without mortgaging existing assets in Israel. On the other hand, the disadvantage is exposure to currency exchange rates, higher equity requirements, and relatively short repayment periods.
Summary
The choice between a mortgage in Israel and a mortgage in Cyprus depends on the investor’s personal needs, the level of equity, and the type of investment. Those who prefer convenience and security may choose Israeli financing, while those who wish to take advantage of low interest rates and direct leverage against the property may prefer the Cypriot option. In any case, it is recommended to perform an accurate financial simulation and obtain professional advice to understand which option is most suitable.
