Mortgage for an Apartment from a Developer 2026

Purchasing an apartment from a developer that has not yet been built requires an understanding of a financing mechanism that is completely different from a mortgage for an existing apartment — a tiered payment schedule, a banking support account, and sometimes a dedicated "grace" period. Here is the complete guide.

Banking Support Account — Why It Exists

The law in Israel requires new projects to operate under "banking support" — all buyers' funds are deposited in a dedicated account supervised by the lending bank, and are released to the contractor only according to the actual progress of construction. This is a central protection for buyers against contractor bankruptcy during construction.

Tiered Payment Schedule — How It Works

Unlike a second-hand apartment where a fixed amount is paid close to delivery, in a developer's apartment the payment is divided into "milestones" — a certain percentage at signing, and an additional percentage at each significant construction stage (foundations, frame, finishing). Each payment is accompanied by a progress check from the bank's supervisor.

Grace Period — What It Is and Why It’s Worth Considering

Banks offer buyers of apartments from developers a "grace" period, during which no full principal and interest repayments are made until the delivery date — only interest is paid on the amounts already paid to the contractor. This prevents a situation where you are paying both a full mortgage and rent simultaneously, while the apartment is still under construction.

Example Calculation — Cost of the Grace Period

If you have paid 600,000 ₪ out of a 1,500,000 ₪ mortgage, in the grace period you will only pay interest on the 600,000 ₪ that have actually been paid (for example, at an interest rate of 4.3%, about 2,150 ₪ per month), and not on the full amount that has not yet been transferred to the contractor.

What Happens If Construction Is Delayed?

Construction delays are a common scenario that it is advisable to prepare for in advance — they may extend the grace period (additional interest cost), and sometimes also lead to compensation from the contractor for the delay, depending on the sales contract and the Sale Law (apartments).

Tax Differences Worth Knowing

As detailed in the comparison guide between a developer and a second-hand apartment, an apartment from a developer includes VAT in the price, and the date of payment of the purchase tax is counted from the date of signing the contract — not from the delivery date — so the obligation to pay purchase tax applies long before you have a physical apartment.

Documents and Checks to Make Before Signing

Before signing a contract with a developer, it is advisable to check: valid building permits, the identity of the lending bank for the project, a realistic timeline for delivery (not just the marketing promise), and the contractor's previous experience with similar projects. A real estate attorney specializing in contractor transactions can save costly surprises.

Sale Law Guarantee — Your Additional Protection

In addition to banking support, the law requires the contractor to provide a guarantee (bank guarantee, insurance, or registration of a warning notice) on every payment you have made beyond certain percentages of the apartment's value — this is an additional layer of protection that should be ensured to be in place and valid before any payment.

Frequently Asked Questions

What happens if the contractor goes bankrupt during construction?
The banking support is designed to protect the funds that have already been paid — in many cases, it is possible to complete the construction with an alternative contractor, but this is a complex legal process that should be avoided by checking the contractor's stability in advance.

Is the grace period ultimately more expensive?
Generally not — it only defers some of the payments, not increasing the total interest, but it is advisable to confirm the exact terms with the bank.

Can you get a preliminary mortgage approval before the project is finally approved?
Yes, but the final approval and the terms of banking support also depend on the project's approval by the lending bank.

Can you refinance a mortgage on an apartment from a developer before delivery?
Generally not in the same way as an existing apartment — until actual delivery, the legal status of the property does not yet allow full registration for standard refinancing.

Considering Purchasing an Apartment or Choosing a Mortgage Mix?

View properties for sale in Ma'ale Adumim and Jerusalem, and contact the Merkaz HaNekasim team for personal advice.