So, you bought a property and now you want to transfer money to Israel.
"Easy," you think to yourself, "I'll just phone up my bank and tell them where to send the money to!"
Unfortunately, it isn't that simple.
While transferring money was straightforward in the past, bank regulations intensified in recent years. It is now more important than ever to have the right information.
Here are four things to consider before moving funds for your property purchase in Israel:
#1 - Calculating Cost in Your Currency
When making a deal, you agree on a price in shekels, but the exchange rate changes daily. How much will you actually be spending? Should you transfer it all at once? Do you know all the expenses involved? It is vital to do all necessary calculations before signing on the dotted line.
Currency exchange professionals like IsraTransfer can help assess what to consider and how much you'll be spending in your local currency.
Costs and expenses include:
Purchase Tax: Once you sign the contract on a property, you will be required to pay a purchase tax. The amount can be substantial, especially if you have more than one property in Israel.
Legal Fees: Real estate lawyers can charge between 0.5% and 1.5% of the purchase price plus VAT. Sometimes additional fees must be paid to the Land Registration Office.
Real Estate Agent: These fees are usually 1.5-2% of the purchase tax plus VAT.
Mortgage Fees: The bank often charges for opening a file with them. They can also require an independent appraiser to determine whether the purchase price reflects the actual value of the home. These fees can add up to a few thousand shekels.
Other Expenses: Also consider municipal taxes, moving costs, and maintenance costs (such as monthly taxes and home insurance).
What about the exchange rate?
You agreed to purchase it in shekels. But, if you will be using foreign currency for your purchase, what exchange rate will you get? The rates fluctuate, and this will affect the value of the foreign currency. IsraTransfer can help you understand the rates and how they will affect the prices of all the expenses mentioned above.
#2 Payment Logistics
Even if you have the money to pay for the property, can you make the actual payments? Different types of payments are required for different kinds of purchases.
New Construction
When buying a new property on paper, some payments must be paid with a voucher. The payment vouchers secure your funds and are required by law. They ensure that you will get a refund in case a major issue arises, like if the contractor cannot transfer your ownership for some reason. These vouchers must be paid in person at the bank. How could you do that if you live abroad?
Luckily, IsraTransfer can do it for you! When the funds for your property purchase in Israel get transferred through us, we can then go ahead and make your payments at the bank, saving you the headache.
Second-Hand Properties
When buying a property in Israel from previous owners, the down payment will likely need to be paid by a bank check to ensure it won't bounce. Bank checks must be issued by a bank in Israel and presented at signing. At IsraTransfer, we can request the bank check on behalf of our clients.
#3 Source of Funds
Due to new regulations, Israeli banks have become very nosy. Your foreign bank will likely transfer your funds to Israel without a hassle, but the Israeli bank might be hesitant to accept them. Israeli banks want to know the source of the funds for all large transfers, meaning, they want to understand how the capital was earned. Did the money come from investments, the sale of a property, a gift, or your savings? Depending on the amount of the transfer, they could ask for documents ranging from a copy of your tax return, a payslip, or an accountant letter explaining how you obtained the funds.
Source of Funds Explained
While providing a source of funds might seem simple, it can actually get pretty tricky. For example, the money for your purchase may have come from an investment you made through a legitimate financial investment management company. When the bank asks for your source of funds, you answer "investment." But the bank wants to know how you acquired the initial funds to make the investment. This is where it can get tricky. They require proof as well.
At IsraTransfer, we are ahead of the curve. We have a close relationship with the banks and know what they require. We know how to ask you the right questions that will get your funds cleared. This saves our clients hours of back-and-forth with Hebrew speaking bank representatives who don't always communicate efficiently with clients overseas.
#4 Timing Your Transfers
When is the best time to transfer your funds? This depends on two factors: rates and deadlines. Your down payment, as well as other fees, will have dates you will need to pay them by. In addition, transferred funds need to be cleared before they can be used for payments, and this can often take up to two weeks!
You'll also want to ensure that your transfer is optimal with regard to the exchange rates. Predicting the market is complicated and not science. Still, keeping on top of market trends can give you some insight into the exchange rate fluctuations and may help you get more bang for your buck.
How can you make the best decision?
It is a good idea to get professional assistance when converting and transferring your funds. An Israeli licensed money transfer service will help you estimate the cost in dollars, time your transfers, clear your funds quicker than the bank and save you a lot of money by getting you a better exchange rate then you can achieve on your own.
Choosing a company whose staff are all English speakers will give you the service you need in your native tongue. They can ensure that you are well versed in all the critical details relating to your purchase.
