Complete Guide to Loans and Financial Programs for New Olim in Israel
Mortgage Programs, Business Loans, Student Loans, and Special Funds for New Immigrants
Introduction
While grants provide essential support for new Olim, loans represent another crucial pillar of financial assistance that can help you achieve major life goals such as purchasing a home or starting a business. Israel offers a variety of loan programs specifically designed for new immigrants, featuring preferential terms including lower interest rates, reduced down payment requirements, and in some cases, portions that convert to grants.
This comprehensive guide explores all the major loan programs available to new Olim, from government-backed mortgages to entrepreneurial funds and student loans. Understanding these options is essential for making informed financial decisions as you build your new life in Israel.
Mortgage Programs for New Olim
Purchasing a home is often the largest financial decision new Olim face. Israel's Ministry of Construction and Housing, in partnership with Israeli banks, offers special mortgage programs designed to make homeownership more accessible for immigrants.
The Zakaut Mortgage (Government-Subsidized Mortgage)
The Zakaut mortgage is the primary government benefit program for new Olim purchasing their first home in Israel. This program offers below-market interest rates and favorable terms that can save you significant money over the life of your loan.
Key Features
Discounted Interest Rate: The interest rate is calculated as the Bank of Israel's average fixed, inflation-linked rate minus 0.5%, with a maximum cap of 3.0%
Loan Amount: Up to approximately ₪200,000, depending on your personal scoring
Loan Term: 20-28 years
No Prepayment Penalties: You can pay off the loan early without fees
Additional Protection: It's more difficult for a lender to evict you for non-payment since part of the mortgage is backed by the government
Eligibility Requirements
To qualify for a Zakaut mortgage, you must secure the loan within 15 years from your "Ma'amad Oleh" (the date your Teudat Oleh was issued). The program is available to married couples, common-law couples, single parents of any age, and single Olim who are 21 years or older. You must not have owned an apartment in Israel within the past 10 years. The process begins by applying for a Teudat Zakaut (eligibility certificate), which is handled through seven participating Israeli banks for a nominal fee of ₪70.
How Loan Amount is Determined
The eligibility level is calculated based on a cumulative score that considers multiple factors: family status, number of years married, months of army or national service, number of children, number of siblings living in Israel, and years since making Aliyah. Families and singles who made Aliyah and have been in Israel for 5 years or more receive an additional loan component with the following structure: ₪19,630 for 5-6 years post-Aliyah, ₪28,370 for 7 years, and up to ₪43,630 for 8-15 years. This means the longer you've been in Israel, the more you may qualify for.
Standard Olim Mortgage Benefits
Beyond the Zakaut program, new Olim enjoy several advantages when obtaining any mortgage in Israel:
Higher Loan-to-Value (LTV) Ratio: Olim can borrow up to 75% of the property value, compared to just 50% for foreign citizens
Down payments can be as low as 5-15% of the property value through the "Mashkanta le-Ole" (Oleh Mortgage) program
Discounted appraisal fees
Discounted penalty fees when repaying early (on the non-Zakaut portion)
Government Housing Lotteries (Diyur Mufchat)
The government has approved special raffle programs for eligible Olim. These include opportunities to purchase specific contractor apartments at discounts of up to ₪400,000 (similar to the Mechir Lemishtaken program for Israelis), and grants of ₪100,000 for purchasing homes in peripheral cities (with purchase prices up to ₪700,000). To enter these raffles, you need a Teudat Zakaut.
Business and Entrepreneurship Loans
Israel actively encourages entrepreneurship among new Olim, recognizing that immigrants often bring valuable skills, innovative ideas, and international business experience. Several specialized funds and programs exist to help Olim start or expand businesses.
The Entrepreneurs Fund for New Immigrants (Keren L'Atzmai Olim)
The Ministry of Aliyah and Integration operates a dedicated loan fund for immigrant entrepreneurs interested in opening or advancing their own businesses. This is one of the most important resources for Olim seeking to become self-employed.
Loan Terms and Conditions
Maximum Loan Amount: ₪100,000
Minimum Equity Capital: 25% of the loan amount
Conditional Grant Component: 17.5% of the total loan (up to ₪5,000) becomes a grant after 3 years if you continue to support yourself from the business
Interest Rate: Index-linked plus 2%
Repayment Period: 6 years, including a one-year grace period (interest-only)
Securities: Usually 3 guarantors required; loans are processed through Bank Hapoalim
Eligibility
Immigrants who received immigrant status up to 10 years ago
Ethiopian immigrants: up to 15 years since receiving immigrant status
Returning residents: up to 2 years from receiving returning resident status
The business must be the main source of income, and you must work in the business yourself
You or your spouse must not have received a loan from this Fund previously
Application Process
To receive a loan, you should contact one of the MATI Centers (Small Business Development Centers). A MATI counselor will examine the feasibility of your business and help prepare a business plan. The counselor then transfers the plan and recommendations to the Fund's committee, which examines various aspects of the business and the entrepreneur's capabilities. If approved, the committee determines required guarantees, and you're referred to the bank to finalize the loan.
The New York Fund for New Immigrants
Administered by the Jewish Agency, this fund offers more generous terms for qualifying Olim entrepreneurs:
Maximum Loan Amount: ₪200,000
Working Capital: Up to 30% of the loan can be used for working capital
Interest Rate: Prime plus 0.6%
Repayment Period: 6 years with one year grace
Fund Guarantee: Up to 95% of the loan (average guarantee: 60%)
Loans are processed through Bank Otzar Hachayal
Eligible applicants include immigrants from any country who received immigrant status up to 10 years ago, with special provisions for immigrant women, and immigrants from Kazakhstan and Ethiopia without time limits.
Israel Free Loan Association (IFLA)
The IFLA provides interest-free loans to small businesses, including those owned by Olim. This fund offers up to ₪90,000 in unlinked New Israeli Shekels for developing an existing business or opening a new one. The loan is intended for purchase of equipment, vehicles essential to the business, renovations, and infrastructure expansion. Repayment must be completed within 30-45 months, and the loan can be repaid early without penalty. Loans typically require 3-4 guarantors depending on the amount.
Keren Tmura le-Olim (Startup and Innovation Fund)
For Olim with entrepreneurial experience or innovative business ideas, the special state fund "Keren Tmura le-Olim" provides start-up grants and investments on preferential terms. Support often comes in the form of non-repayable grants or convertible loans. Participants in associated programs gain access to business incubators and accelerators offering free workspaces, expert mentoring, legal and accounting support, assistance in product development (MVP), and help with investment sourcing. Additional tax incentives (Atzmat Mas) are available for early-stage startups.
The State Guarantee Fund for Small Businesses
This government-backed fund helps establish or expand small businesses across all economic sectors. The government serves as the loan guarantor, allowing banks to extend loans despite insufficient collateral. Key features include: credit limit of up to ₪500,000 per business, loan periods of up to 5 years for equipment purchase and 1 year for operating capital, the borrower invests minimum 25% of approved credit as equity, and borrowers provide only personal guarantee and mortgage of financed fixed assets as collateral. The interest rate is Prime-linked plus market rate, and loans are available through Bank Otzar Hachayal and FIBI. This fund is particularly valuable for Olim who may not have established credit histories or collateral in Israel.
Student Loans and Educational Financing
While many Olim qualify for full tuition grants through the Student Authority, additional financing options are available for those with educational expenses beyond covered amounts.
Bank Student Loans
Most Israeli banks offer student loans with low interest rates and deferred payment plans. These loans can cover tuition costs that exceed Student Authority support, as well as living expenses during studies. Payment typically begins after graduation, and terms are generally favorable compared to commercial loans.
University-Based Loans
Many Israeli universities and colleges offer their own loan programs through their Dean of Students offices. These often feature terms specifically designed for students' financial situations, including deferred repayment and flexible schedules.
Interest-Free Loan Funds (Gemachim)
Several charitable organizations provide interest-free loans to students, continuing the Jewish tradition of tzedakah and gemilut chasadim. The Shmuel and Pearl Lamm Free Loan Fund, for example, provides short-term (24-month) interest-free loans to YU Alumni living in Israel. Various other gemachim exist throughout Israel to support students of different backgrounds and institutions.
U.S. Federal Student Loans
For American Olim, U.S. federal student loans (Direct Subsidized/Unsubsidized and PLUS loans) may be available for approved programs at certain Israeli universities. While federal grants like the Pell Grant are not available for study outside the U.S., federal loans can still provide crucial funding. Check with specific institutions about their FAFSA eligibility. Additionally, many Israeli universities recognized by the U.S. Department of Education can accept funds from 529 college savings plans.
Emergency and Special Circumstance Loans
Emergency Loan Funds
Various organizations maintain emergency loan funds to help Olim facing unexpected financial difficulties. The Jewish Agency, Jewish Federations, and various NGOs operate programs that can provide rapid financial assistance during crises. These typically offer interest-free or low-interest loans with flexible repayment terms designed to help people through temporary hardships while maintaining their dignity and financial independence.
The Israel Fund Career Transition Grants
Recognizing that the greatest barriers to successful Aliyah are often financial, The Israel Fund offers $5,000 grants to help ease the financial burden of career transition. Recipients are enrolled in industry-focused incubator programs lasting 40-60 hours, where they're assigned projects to help businesses in need of their skills. This hands-on experience, mentorship, and portfolio-building prepares grantees to launch their careers in Israel.
Practical Guidance for Loan Applications
Documentation Requirements
When applying for any loan in Israel as a new Oleh, prepare the following documents: Teudat Zehut (Israeli ID), Teudat Oleh (immigration certificate), Teudat Zakaut for housing-related loans, proof of income (Israeli or foreign, including investment income), bank statements, and professional documentation such as diplomas and licenses if relevant. For business loans, you'll also need a comprehensive business plan and professional licenses if required for your field.
Repayment Capacity
Israeli banks calculate repayment capacity based on your monthly net income. The Bank of Israel limits the debt-to-income ratio to 40%, meaning if your combined monthly net income is ₪10,000, your maximum monthly loan payment should not exceed ₪4,000. Income from any source, whether Israeli or foreign employment, rental income, or investments, can be counted. Be prepared to provide documentation proving all income sources.
Working with Banks
Several Israeli banks have departments specifically serving Olim with staff who speak English, French, Spanish, Russian, and other languages. Bank Mizrahi-Tefahot, for example, is the national leader in mortgages with comprehensive services for Olim Hadashim. Bank Hapoalim and Bank Otzar Hachayal also have extensive experience with immigrant clients. Consider working with a mortgage broker who understands Olim benefits to navigate the process more effectively.
Tips for Success
Start early: Begin gathering documentation and researching programs before you need the loan
Build relationships: Open a bank account early and develop a history with your bank
Seek professional advice: Work with a lawyer, mortgage broker, or financial advisor who understands Olim benefits
Apply to Olim-specific funds first: Programs designed for immigrants often have better terms
Don't be afraid to negotiate: Banks compete for Olim business and may offer better terms
Maintain good records: Keep copies of all applications and correspondence
Conclusion
Israel's loan programs for new Olim reflect the country's commitment to immigrant success. From government-subsidized mortgages that make homeownership achievable to business loans that can launch your entrepreneurial dreams, these programs offer real opportunities for building a stable and prosperous life in Israel.
The key to accessing these benefits is understanding what's available and acting within the eligibility windows. Many programs have time limits tied to your Aliyah date, so it's important to research your options early and plan accordingly. Organizations like Nefesh B'Nefesh, the Jewish Agency, and MATI Centers can provide guidance and support throughout the process.
Remember that loans are tools to help you achieve your goals, not solutions to everyday financial challenges. Borrow responsibly, understand your repayment obligations, and take advantage of the unique benefits available to you as a new Oleh. With proper planning and the right financial support, you can build a thriving future in Israel.
Note: All figures and terms mentioned in this article are current as of 2025 and are subject to change. Always verify current rates, requirements, and eligibility with the specific institutions and government offices before making financial decisions. Consider consulting with a licensed financial advisor familiar with Olim benefits.
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