Cash vs. Mortgage

As you may have probably noticed, real estate in Israel is not among the cheapest. The prices keep going up, and no one really knows when it will stop. Therefore, real estate in Israel is very attractive for investors and those planning to make aliyah in the future. Many of those wonder whether it is wise to buy a cheaper property in cash or double their budget by getting a mortgage.

To remind you, non-Israeli residents can apply for a mortgage in Israel and get up to 50% of the property value, thus doubling their initial budget. But should they? We will find out.

Let’s assume that your budget is USD 250k, which is about NIS 775k. You can buy either a small property far from the center in cash or take a loan and buy something newer and better. Since we can’t tell for sure how much these apartments will cost in 10 years, let’s go back in time and assume that you purchased an apartment 10 years ago. For simple calculations, we will ignore the fees, the taxes, and the ongoing payments and see what is better in general.

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 the last years housing prices rose by 50-100%, depending on the area. We took the lower increase for the calculations.
2 – The monthly rent starts at about $700 and goes up to $1100 as housing prices rise, making an average of $900 a 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 bought a property in cash 10 years ago, you would have a profit of $233k, and if you got a mortgage, your profit would be $392k, higher by almost 70% (!), and even more if the housing prices in that area rose by 75 or 100 percent. However, the clean profit will be lower if you go into details and include all the possible expenses, but it depends on your preferences, status, availability, and other factors.


Is getting a mortgage always a better option? Mostly yes, but not always. In the long run, it is indeed a wiser investment, but you won’t really enjoy the monthly rental income since it will be covering your mortgage payments, and the difference will be spent on different expenses.

In simple words – if you are more interested in getting a small sum from your investment every month– you shouldn’t get a mortgage, or at least not a big one, but if you’re looking 5, 10, or 15 years ahead, then the wiser decision will be getting a loan and making others’ money increase your profits.  

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