The House Always Wins

By Chaim Shulman, Real Estate Advisor, Gabai Real Estate

A client reached out to me after chag. In shul, all his friends had been talking about the same thing: new projects where you put just 10% down, a builder's loan carries the rest, and the developer even offers to cover part of the interest.

He wanted to know if it was too good to be true.

My answer: it depends on the buyer. Before we get into any of the details, here is the one thing to understand. The developer isn't paying for that loan out of his own pocket. The cost of the financing is built into the price of the apartment. You're not getting a cheaper apartment with easy terms. You're getting a more expensive apartment with easy terms. It's important to keep that in mind.

Builder's loans aren't new. A couple of years ago, the big pitch was the 10/90 or 20/80 deal: put down 10 or 20 percent, and pay the rest when the keys are in your hand. In 2025, the Bank of Israel decided it had seen enough of these and made them harder for banks to offer. In plain terms, it limited how many of these loans a bank can hand out each month, and it made it more expensive for banks to back projects that lean heavily on them.

But the restrictions by the Bank of Israel did not make these deals disappear. The rules made them harder, not illegal, and developers adapted. Today the same idea comes in a few different packages. It's the same loan with a different marketing angle, and as we'll see, any way you slice it, the developer is making money. Here's how it actually works.

Whatever the package, a builder's loan is a mortgage in your name. You still need to be approved, just like any other mortgage, and you want that approval in hand before you sign the contract, not after you're already on the hook. What changes is how the developer helps you carry the loan, and today that usually takes one of three forms.

The first is the classic balloon loan. The developer pays the interest for a set period, usually two to three years or until you get the keys, and you pay nothing in the meantime. When that period ends, the full loan comes due at once, and you either pay it off or refinance it into a regular mortgage.

The second is a regular mortgage with a grace period. The bank issues the mortgage when you buy, the developer covers the interest until delivery, and then the loan simply keeps running, with you making the payments at the full rate. That rate can be higher than what you'd get by refinancing at that point.

The third is a longer-term subsidy. The developer arranges a mortgage in your name, often for 20 years, and covers part of the interest for the life of the loan, usually on a portion of your financing rather than all of it. If the loan carries a 5% rate, the developer might cover enough that you effectively pay 2.5%. On paper, it looks like you got a better mortgage rate.

The appeal is real. You push a big chunk of your payments closer to possession, and the developer gets the cash it needs up front to fund construction. Both sides get something out of it, and the developer takes on very little risk.

So what does it actually cost you? More than most buyers realize. From what I see in the projects I work with, the financing premium built into the price is easily a few hundred thousand shekels, and my own estimate is that you're paying 5% to 10% or more over what the same apartment would cost with straight financing.

So who is this actually good for? The buyer whose money is already working somewhere else.

If you have investments, or your cash is earning interest elsewhere, you may not want to pull that capital out to fund an apartment that won't be ready for years. A builder's loan lets you leave it where it is. Yes, you're paying more for the apartment. But over a two-to-three-year period, what your money earns elsewhere can often outpace the extra cost built into the price.

In other words, it's not free money. It's a trade, and for the right buyer, it's a good one.

I saw this play out recently. A developer I met with offered a client a simple choice: take the builder's loan, or skip it and get a 200,000 NIS discount on the apartment.

At face value, 200,000 NIS off sounds like the obvious pick. But the client crunched the numbers. He compared the discount to what his money would earn if he left it invested for the next two to three years instead of putting it into the apartment now. The investment came out ahead, by a comfortable margin. He took the loan.

Notice what the developer did there, by the way. It put a price tag on the loan: 200,000 NIS. Most developers won't do that for you. You have to assume the number is there and ask.

That's the buyer's side. What people often miss is that the developer isn't losing money either.

First, as we said, the cost of the financing is already in the price. You're not getting a cheaper apartment. You're getting a way to defer your payments, and you're paying for the privilege.

Second, the loan is in your name. If you run into financial trouble later, can't qualify for a mortgage, or can't refinance when the builder's financing period ends, that's your problem, not the developer's. You're still responsible for the loan under the agreed terms, and you'll be refinancing at whatever interest rates happen to be at that moment, not the ones you're reading about today.

The same goes for those interest subsidies. They're attractive to a buyer, but don't make the mistake of thinking the developer is giving anything away. It's an incentive that's calculated into the cost of the apartment.

So yes, these programs can absolutely help buyers. They make it easier to get into a project and let you delay a large portion of your payments until later.

But they don't make the apartment a better deal. In a slower market, these loans are one of the more creative ways developers keep buyers interested without lowering prices.

That's why I call it the house always wins. In a casino, the house doesn't win because every player loses. Plenty of people walk out ahead. The house wins because the game is built so that, over all the players and all the hands, the math favors the house. A builder's loan is the same game. The developer sells the apartment, at full price, with the financing cost already inside it, and the loan sits in your name. The developer wins every time.

Gabai Real Estate is a boutique Anglo-Israeli agency serving Anglo and Israeli buyers across Jerusalem, Efrat, Ma'ale Adumim, Ra'anana, Tel Aviv, and communities throughout Israel. Reach out, and I'll be happy to help you.

General market information only, not personalized financial, legal, or tax advice.

Chaim Shulman is a Real Estate Advisor at Gabai Real Estate. To talk through a builder's loan project you're considering, reach out to Chaim at chaim@gabairealestate.com or +972-58-583-3377.