Cash vs. Mortgage

As you are likely aware, real estate prices in Israel tend to be on the higher side. The continuous upward trend raises the question of whether it is advisable to purchase a property in cash or consider taking on a mortgage to expand your budget.

For non-Israeli residents, it's worth noting that they can apply for a mortgage in Israel and secure up to 50% of the property's value, effectively doubling their initial budget. However, the question remains: is it the best course of action? Let's delve into this topic.

Let's assume your budget is USD 250k, equivalent to approximately NIS 775k. With this budget, you have the option to purchase a smaller property in cash, located further from the city center, or leverage a loan to acquire a newer and better property. As predicting future property prices with certainty is challenging, let's take a step back and analyze the scenario of purchasing a property ten years ago. For the sake of simplicity, we will disregard fees, taxes, and ongoing payments and focus on the overall comparison.

Cash - $250k

Your capital - $250k
Apartment cost in 2012 - $250k
Apartment cost in 2022 - $375k1
Average monthly rental income - $9002
Total rental income - $108k
Profit after selling – 375k – 250k = $125k
Total revenue – 125k + 108k = $233k

1 – In recent years, housing prices have risen by 50-100% (varying by area). We considered the lower increase for these calculations.
2 – Monthly rental prices range from approximately $700 to $1100, averaging at $900 per month

Mortgage – $500k

Your capital - $250k
Loan – $250k
Apartment cost in 2012 - $500k
Apartment cost in 2022 - $750k
Average monthly rental income - $350
Total rental income – $42k
Balance of loan repayment – $150k3
Profit after selling – 750k – 250k – 150k = 350k
Total revenue – 42k + 350k = $392k

3 – Based on a 20-year mortgage with an average interest rate


If you had purchased a property in cash ten years ago, your profit would be $233k. However, opting for a mortgage would have yielded a higher profit of $392k, an increase of almost 70%! This margin would be even greater if housing prices in the area rose by 75% or 100%. It's important to note that these figures represent clean profits without considering all possible expenses, which can vary depending on individual preferences, status, availability, and other factors.


Is obtaining a mortgage always the superior choice? In most cases, the answer is yes, but not always. In the long run, it is indeed a wiser investment. However, it's worth considering that the monthly rental income would primarily go towards covering mortgage payments, with the remaining difference allocated to other expenses.

In simple terms, if your primary interest lies in receiving a small monthly return on your investment, it may be more advisable to avoid or limit taking on a mortgage. On the other hand, if you have a long-term perspective of 5, 10, or 15 years, opting for a loan can harness the potential of increasing your profits using borrowed funds.

If you still find yourself uncertain, please don't hesitate to reach out to us. We are here to assist you in making the right decision.

Ready for your home in Israel?
WhatsApp Telegram Call me Inquire
Call me back