Buying from a developer
Developer financing deals: what lies behind 20/80 and the developer loan
"20% now, 80% on delivery", or "the developer pays the interest until you get the keys". In recent years financing deals have become the main marketing tool for new apartments. They can suit a particular buyer, but the benefit is not free, and the main risk arrives precisely on delivery day. Here you will find how these deals work, what they really cost, and what to check in the contract before signing.
Two types of deal, two different mechanisms
| Subject | Deferred payment (20/80, 10/90) | Developer loan (subsidized balloon or bullet loan) |
|---|---|---|
| What you pay now | 10% to 20% of the price | Under a regular payment schedule, mostly from the loan funds |
| Where the money comes from during construction | From your own equity only | From a bank loan, in your name |
| Interest during construction | No loan and no interest | The developer pays it, for the period set in the contract |
| What happens on delivery | You need a mortgage and equity for the entire balance | The loan remains, and when the subsidy ends you start paying |
| The main risk | Mortgage terms and the appraisal on delivery day | A subsidy that ends before you receive the apartment |
What it really costs
The developer has a financing cost: it receives most of the money only at the end, or pays interest to the bank in your place. That cost is usually built into the price of the apartment. So the first question is how much the same apartment costs under a regular payment schedule, where you pay according to the progress of construction. The difference between the two prices is the real price of the benefit. You can compare it to the interest you would pay on a regular mortgage over the same period, and check which is more worthwhile.
Six risks worth knowing
- Mortgage terms on delivery day. In a 20/80 deal you take the mortgage two or three years from now. No one knows what the interest rate will be then, or what the bank's terms and your personal circumstances will be.
- The appraisal. The bank finances according to its appraiser's valuation on delivery day, not according to the price in the contract. If the appraisal is lower than the price, the equity you need increases. The Bank of Israel's loan-to-value limits also apply.
- The equity. You need to know in advance where it will come from and when: the sale of an existing apartment, savings being released, or help from family. An apartment whose sale is delayed may leave you without the money on delivery day.
- Breach. If you do not pay the balance on time, you will be in breach of the contract. Developer contracts usually set high agreed damages and a right of cancellation, so part of the money you have paid may be at risk.
- Linkage. In a deferred payment deal most of the price is paid at the end. If the contract includes linkage, it accrues on up to half of each payment throughout the construction period, up to the contractual delivery date. Some deals are offered without linkage, and the wording is worth checking. You can calculate the cost with the linkage calculator.
- Late delivery. With a developer loan, if the subsidy is set to a fixed date and delivery is delayed, you will pay interest on an apartment you have not yet received. It is worth providing that the subsidy continues until actual delivery. Separately, a delay of more than a month entitles you to compensation under section 5A of the Sale (Apartments) Law; see the late delivery compensation calculator.
What the Bank of Israel did
The Banking Supervision Department issued a temporary directive that applies from 6 April 2025 until the end of 2026. The directive requires banks to allocate additional capital to projects in which, in more than a quarter of the contracts, a significant part of the price is deferred to the delivery date. It also limits balloon loans with a developer subsidy to 10% of all housing loans the banks make each month.
The deals were not banned, but they were restricted and their financing became more expensive. In this context the Bank of Israel stressed the importance of early underwriting of buyers, and for you the meaning is simple: before signing, it is worth obtaining an approval in principle for the mortgage, rather than leaving the question until delivery day. The Bank of Israel has said it will consider whether to extend or update the restrictions.
What to check in the contract
- The price on both tracks. Ask the developer for the price under a regular payment schedule, and compare.
- The date of the large payment. Is it tied to actual delivery, meaning Form 4 and an apartment fit for occupancy, or to a fixed date and a "notice of readiness"?
- Linkage. Which payments it applies to, and until when.
- What happens if the mortgage is not approved in time. A grace period, late-payment interest within the limits of section 5B, and not immediate cancellation of the transaction.
- With a developer loan: in whose name the loan is, when the subsidy ends, what happens if delivery is late, and what happens if you sell the apartment before delivery or repay the loan early.
- Security. Every payment must be protected under the Investments Security Law; see Sale Law guarantee. With deferred payment the exposure during construction is lower, because you have paid less.
- Purchase tax. It is calculated on the full price. Under section 51 of the Real Estate Taxation Law, in a sale agreement the tax is paid on the regular date, or when possession passes to the buyer, when the buyer has paid more than half of the price, or when an irrevocable power of attorney for registration is given, whichever is latest. So in a deferred payment deal the payment date may be postponed. Check the date when reporting to the Real Estate Tax Office, and plan your liquidity in advance; see the purchase tax calculator.
- Selling before delivery. Some people buy in a deal in order to sell the right before delivery. The contract usually requires the developer's consent and a handling fee, and the sale of the right is subject to capital gains (betterment) tax; see the capital gains tax calculator.
Who the deal suits
A deferred payment deal mainly suits someone whose equity is expected to arrive on a known date, for example from the sale of an existing apartment or from savings being released, and whose income is stable. It is less suitable for someone who plans to finance the entire balance with a high mortgage, or who relies on rising prices to sell before delivery. In such cases the risk on delivery day falls entirely on them.
Timeline and cost
Timeline: reviewing the contract, the payment schedule and the loan terms, and preparing a rider of comments, usually takes a few business days from receipt of the documents. It is worth obtaining the approval in principle for the mortgage in parallel.
Cost: the fee is set in a fee agreement. You can calculate the ancillary costs of the purchase with the purchase tax calculator and the ancillary costs calculator.
Comparing the payment tracks
| Subject | Regular payment schedule | Deferred payment (20/80) | Developer loan |
|---|---|---|---|
| Equity on signing | According to the schedule | Low | According to the schedule, mostly from the loan |
| Interest during construction | On the mortgage, if one was taken | None | Paid by the developer, until the subsidy ends |
| Certainty on delivery day | High | Low | Medium |
| Apartment price | Baseline for comparison | Usually higher | Usually higher |
Related articles and pages: Buying an apartment from a developer | Changes rider to a developer contract | Sale Law guarantee | Linkage calculator | Late delivery compensation calculator | Purchase tax calculator
Questions and answers
Is 20/80 worthwhile?
It depends on the price. Ask the developer for the price under a regular payment schedule, and compare the difference to the cost of a regular mortgage over the same period. If the difference is higher than the interest you would pay yourself, the benefit costs more than it saves.
What happens if I do not get a mortgage on delivery day?
If you do not pay the balance on time, you will be in breach of the contract, and the developer may demand agreed damages and even cancel the transaction. So obtain an approval in principle in advance, and ask for a grace period in the contract and a clear mechanism in case of delay.
Is a developer loan considered my mortgage?
Yes. You are the borrowers, and the bank assesses you as with any mortgage. The developer only pays the interest for a certain period. When the subsidy ends, the repayments are yours.
Do financing deals still exist after the Bank of Israel restrictions?
Yes. The temporary directive did not ban the deals. It restricted them and made their financing more expensive, and it is in force until the end of 2026.
Does linkage also apply to the 80% paid on delivery?
If the contract includes linkage, it can apply to up to half of each payment after the first 20%, up to the contractual delivery date. With deferred payment this may add up to a significant amount, so check the clause and calculate in advance.
Not sure the deal is safe? Let's start with a conversation
In an initial conversation we will go over the property, the other party and the payment schedule, and tell you what needs to be checked before you sign.