Arthur Yakubovich
Your local guide to real estate in Israel

Buying property in Israel: Cash vs. mortgage

Photo by Kostiantyn Li on Unsplash

When it comes to purchasing property in Israel, the high real estate prices often prompt the question of whether it is better to buy in cash or opt for a mortgage to expand your budget. This dilemma applies not only to Israeli residents but also to non-Israeli residents who can also apply for a mortgage in the country.

Let’s consider a scenario where your budget is USD 250K, equivalent to approximately NIS 775K. With this amount, you have the option to purchase a smaller property outright or leverage a loan to acquire a newer and better property. To analyze the potential outcomes, let’s look at the scenario of purchasing a property ten years ago, disregarding fees, taxes, and ongoing payments for simplicity.

Cash Purchase – $250K
– Initial investment: $250K
– Property cost in 2012: $250K
– Property cost in 2022: $375K (assuming a 50% increase)*
– Average monthly rental income: $900
– Total rental income over ten years: $108K
– Profit after selling: $375K – $250K = $125K
– Total revenue: $125K + $108K = $233K

Mortgage – $500K
– Initial investment: $250K
– Loan: $250K
– Property cost in 2012: $500K
– Property cost in 2022: $750K (assuming a 50% increase)*
– Average monthly rental income: $350
– Total rental income over ten years: $42K
– Balance of loan repayment: $150K (based on a 20-year mortgage with an average interest rate)
– Profit after selling: $750K – $250K – $150K = $350K
– Total revenue: $350K + $42K = $392K

*In most places, the prices went up by 100% or more in the last decade, therefore, the profits are significantly higher. However, we use 50% to reflect the minimal increase according to the forecast for price increases in the coming decade. 

Based on the analysis, opting for a mortgage would have yielded a higher profit of $392K compared to a cash purchase, which would have resulted in a profit of $233K. This represents an increase of almost 70%. It’s important to note that these figures only reflect clean profits and do not consider all possible expenses.

In most cases, choosing a mortgage is a wiser long-term investment strategy, as it has the potential to generate higher profits. However, it’s crucial to consider that the monthly rental income would primarily go towards covering mortgage payments, with the remaining difference available for other expenses. If your priority is to receive a small monthly return on your investment, avoiding or limiting a mortgage may be advisable. On the other hand, if you have a long-term perspective and are open to borrowing funds to maximize profits, opting for a mortgage can be a beneficial choice.

If you still have uncertainties or need further guidance, feel free to reach out to us. Our team is here to help you make an informed decision.

Arthur Yakubovich is a CVO of Sabras, your local guide to real estate in Israel. Visit the website for more information or contact him directly at +972-58-444-8882 or

About the Author
Arthur Yakubovich is a real estate expert in Israel, specializing in serving English and Russian-speaking clients. His rich experience in the local market inspired him to write about Israeli real estate and thus guide and educate many who are interested in purchasing, selling, and investing in local real estate.
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