Did you inherit an apartment together with your siblings? Does one of you want to buy out the others' shares? Here's how to execute the process correctly, economically, and profitably.
One of the most common scenarios in real estate is receiving property as inheritance by multiple heirs (usually siblings). In many cases, the heirs decide not to sell the property to a third party, but rather have one sibling purchase the others' shares and become the sole owner of the property. This process is called "purchasing a share in property" or "dissolution of joint ownership between heirs."
From the bank's perspective, this is a more complex transaction than a regular purchase. The bank needs to understand that this is a genuine transaction ("arm's length transaction") and not an attempt at fictitious money transfer within the family. This is where the critical need for professional mortgage consulting comes into play, knowing how to present the file to the bank in a way that ensures quick approval and excellent terms.
Important to know: In a mortgage transaction between heirs, the bank evaluates the entire property, but financing is usually provided only for the purchased portion (the other siblings' share), not for the portion already owned by the buyer.
In a mortgage between heirs, financing percentages are usually derived from the value of the purchased share only. If this is a primary residence for the buyer, up to 75% financing of the purchased share's value can be obtained. If this is an investment property (additional apartment), financing will be limited to 50% of the purchased share's value.
Inheriting an apartment is tax-exempt, but purchasing the siblings' shares is a real estate transaction in every respect. The buyer will pay purchase tax on the acquired portion (according to their tax brackets), and the selling siblings may pay capital gains tax, unless they receive an exemption (for example, linear inheritance apartment exemption).
The bank will require seeing an estate distribution agreement or an organized sale agreement between the siblings. The agreement must be clear, include the exact consideration and payment schedules. Without a valid legal agreement, the bank cannot approve the mortgage.
The process of taking a mortgage to purchase an inherited share requires careful planning. First, an early appraisal must be conducted to agree on the property's value among the siblings. Then, a sale agreement is drafted.
Next, approach the bank for preliminary approval. Here, correct presentation is of utmost importance: if you present the request as a "general purpose loan," interest rates will be high. If you present it as a "mortgage for property purchase" (residential), you'll enjoy significantly lower interest rates. This is exactly where professional mortgage consulting saves you tens of thousands of shekels.
Transactions within the family are fertile ground for bureaucratic errors. Banks are suspicious, tax authorities require accurate reporting, and family relationships may be sensitive.
As part of our service, we accompany you through all stages: starting from evaluating the economic feasibility of the transaction, through mortgage consulting for first-time buyers (if this is your first apartment) or home upgraders, to managing negotiations with banks to obtain the best interest rates. Our goal is to enable you to keep the family property at minimum cost and maximum peace of mind.