Home upgraders (mishapri diur) face one question that determines almost everything else: should you sell first or buy first? That is, sell the current apartment before anything else, or secure the next one before selling. Each path solves one problem and creates another. Selling first gives certainty about your equity, but requires knowing where you are moving. Buying first secures the apartment you wanted, but creates a period of two apartments, interim financing and a clock ticking with the Israel Tax Authority. In this guide we break down both paths, explain what a bridge loan is and how to coordinate a back to back transaction, go through the time windows that determine the tax treatment and calculate a complete scenario of a family moving to a larger apartment.
Sell first or buy first: the two paths and what each requires
| Sell first | Buy first | |
|---|---|---|
| Certainty about equity | High, the price has already been signed | Low until the current apartment is sold |
| Certainty about the next apartment | Low, still searching | High |
| Interim financing | Usually not required | Usually required, and it costs money |
| Pressure in negotiations | On the purchase | On the sale |
| Tax risk | Low | Depends on selling within the time window |
| Financing ratio for the new apartment | Up to 75% if you own no apartment on the purchase date | Up to 70% as a home upgrader |
There is no single right path. The decision depends on three things: how much your equity depends on the proceeds from the current apartment, how easy it is to find the next apartment in the area you have chosen, and how quickly your apartment is likely to sell.
Selling first: certainty, and a long vacancy period instead of two moves
Whoever sells first knows exactly how much money will be available, and enters negotiations on the next apartment as a buyer with ready equity. There is also a less discussed advantage: if you no longer own an apartment on the purchase date, the bank will classify you as a buyer of a single apartment with up to 75% financing, and purchase tax (mas rechisha) will be calculated at the single apartment brackets regardless of any timetable.
The difficulty is the move. To avoid being left without a home, upgraders who sell first usually manage the vacancy date:
- Long vacancy period. Agree with the buyer on handover in six to nine months or even more. Many buyers, especially those who are selling an apartment themselves, prefer this. On the other hand, a long vacancy period may narrow the circle of buyers and affect the price.
- Rent back. The buyer receives the apartment and rents it back to the seller for a short period. This requires a separate and clear agreement.
- Interim rental. Move into a rented apartment until you find the next one. This costs rent and two moves, but lets you search without pressure.
Anyone planning to sell first should begin with the right pricing. A professional property valuation before going to market helps set a price that will bring a serious buyer within a time frame that fits your schedule.
Buying first: the bridge loan and what it costs
Whoever buys first has to make the first payments on the new apartment before receiving any money from the sale. The gap is bridged in several ways:
- A balloon or bullet bridge loan. A short term loan in which you pay only interest, or nothing at all, until repayment, and the principal is repaid from the sale proceeds.
- A loan secured on the current apartment. A general purpose loan based on the apartment you own, on the terms and financing ratios that the Bank of Israel permits for such loans.
- A tailored payment schedule. Negotiate with the seller a small first payment and larger payments later, timed to when the money from your sale is expected to arrive.
The financing ratio for the new apartment as a home upgrader is up to 70%, provided you declare that you will sell the current apartment. In practice, the bank also examines your repayment capacity during the period in which there are two loans, and the repayment to income ratio is limited. A bridge loan is not only an interest cost; it is also an obligation you must meet if the sale is delayed or closes at a lower price than expected.
A back to back transaction: how to coordinate payments
The common way to reduce interim financing is to coordinate the two transactions so that the money from the sale is used to pay for the purchase. What needs to be coordinated:
- The payment schedules. Each payment received from the buyer of the old apartment should arrive before the corresponding payment to the seller of the new apartment, with a margin of a few weeks.
- The existing mortgage. If there is a mortgage on the apartment being sold, part of the buyer’s payments will first go to paying it off. The procedure, the fees and the bank’s letter of intent are explained in the article on selling an apartment with a mortgage. Another option is to transfer the mortgage to the new apartment.
- Handover dates. Handover of the old apartment should come after you receive the keys to the new one, or at least in the same week.
- The sale agreements. The payment, indexation and agreed compensation clauses in the two agreements need to match each other. What to check in each clause is explained in the article on the apartment sale agreement.
The weakness of a back to back transaction is the dependency: a buyer of your old apartment who is late with a payment delays you with the seller of the new apartment. That is why it is worth building in a safety margin, for example a credit line available for a short period, rather than planning around tight dates.
Tax time windows: what exactly determines the deadline
Home upgraders who buy first benefit from two reliefs, and both depend on selling the old apartment within a set period:
- Purchase tax. The new apartment is taxed at the single apartment brackets, provided the old one is sold within the period.
- Capital gains tax (mas shevach). The old apartment is considered a single apartment for the purpose of the exemption, even when you own a replacement apartment purchased within the period before the sale.
The length of the period depends on when you purchased the replacement apartment:
- Purchase on or after June 1, 2025: 24 months from the date the replacement apartment was purchased.
- Purchase between June 1, 2023 and May 31, 2025: 18 months, under a temporary provision that has expired.
- Purchase from a developer: for purchase tax purposes the old apartment may be sold up to 12 months from the date you receive possession of the new apartment, if that date is later than the end of the regular period.
- Extension in 2026: because of the security situation, deadlines that fell between February 28 and May 31, 2026 were extended by three months.
Two points that are often missed. First, a “sale” means signing a sale agreement, not handing over the keys. Second, if the old apartment is not sold in time, the Israel Tax Authority collects the difference up to the additional apartment brackets, plus indexation differences and interest, and the capital gains tax exemption on the old apartment may be affected. We set out the exemption conditions themselves and the value ceiling in the article on capital gains tax when selling an apartment, and the brackets in the article on purchase tax in 2026. Because the rules have changed several times over the past three years, check the period that applies to you with your lawyer before signing for the new apartment.
A worked scenario: moving from Ramat Aviv Gimel to a larger apartment
The example is for illustration only, and its figures are assumptions for the purpose of the calculation. A family lives in a four room apartment in Ramat Aviv Gimel valued at about ₪4,200,000, with a mortgage balance of ₪600,000. They want to buy a five room apartment for ₪5,600,000. Sale costs, including the lawyer and brokerage, are estimated at ₪100,000.
Option A: selling first
- Net equity from the sale: ₪4,200,000 less ₪600,000 less ₪100,000, that is ₪3,500,000.
- Mortgage required for the new apartment: about ₪2,100,000, a financing ratio of about 38%, far below the cap. Purchase tax and associated costs are paid from additional savings, because the bank does not finance them.
- Purchase tax at the single apartment brackets: about ₪175,500.
- Additional cost: if there is no long vacancy period, a few months of interim rent and a double move.
Option B: buying first
- Until the sale, about ₪3,500,000 has to be bridged. Assume a bridge loan at 5.5% interest for eight months: an interest cost of about ₪128,000.
- If the old apartment sells for 5% less than estimated, equity shrinks by ₪210,000, and the gap must be financed with a larger mortgage.
- If the sale is not signed within the time window, purchase tax on the new apartment will be calculated as for an additional apartment: 8% of ₪5,600,000, that is ₪448,000, an extra ₪272,500 or so beyond the single apartment calculation, plus indexation differences and interest.
The figures show why buying first suits mainly those whose apartment is likely to sell quickly, or those who have equity that does not depend on the sale. In a market where apartments sell more slowly, the risk is not only the cost of bridging, but the combination of a lower than expected sale price and the tax clock.
How to build a timetable for the move
- Before anything else: a valuation of the current apartment, a check of the mortgage balance and the early repayment fee, and an approval in principle from the bank for both scenarios.
- Deciding on the order: based on how quickly apartments are expected to sell in your area and on the supply in the area you are moving to.
- If you sell first: go to market with clear vacancy terms, and start searching in parallel. It helps to know in advance which neighborhoods and which price range you are looking at, for example in the neighborhoods of north Tel Aviv.
- If you buy first: sign a payment schedule that leaves time for the sale, close the bridge financing before signing, and put the old apartment on the market immediately.
- Two weeks before each payment: make sure that the money from the other transaction has arrived or that the financing is available.
- Throughout: mark the end of the tax time window in your calendar, with a margin of a few months.
If you are planning to sell, you can read how we accompany property owners who want to sell.
Frequently asked questions
How long do home upgraders have to sell the old apartment?
For those who purchased the replacement apartment on or after June 1, 2025: 24 months from the purchase date, both for purchase tax and for the capital gains tax exemption. For those who purchased between June 2023 and May 2025: 18 months. For a purchase from a developer there is a special provision linked to the date possession is received.
What is a bridge loan?
A short term loan that finances the new apartment until the money from the sale arrives. Usually you pay only interest on it, or nothing until repayment, and the principal is repaid from the sale proceeds.
How much financing do home upgraders receive?
Up to 70% of the value of the new apartment, provided you declare that you will sell the current apartment. Someone who sold before purchasing and owns no apartment on the purchase date can receive up to 75%.
What happens if I did not sell the old apartment in time?
The Israel Tax Authority will collect the purchase tax difference up to the additional apartment brackets, plus indexation differences and interest, and the capital gains tax exemption on the old apartment may be affected.
Does a “sale” count from the signing date or the handover date?
From the date the sale agreement is signed. The handover date can be later.
Can the existing mortgage be transferred to the new apartment?
Yes, under certain conditions, by transferring the mortgage (grirat mashkanta). This mainly makes sense when the existing mortgage is on better terms than those currently on the market.
Before deciding whether to sell first or buy first
Moving between apartments means two transactions that have to work like one. Whoever plans the order, the financing and the timetable in advance reduces most of the risks. If you would like to examine both scenarios for your apartment and the market in your area, we would be happy to help. You can contact us or call 077-500-4600 (from abroad, +972 77 500 4600).
The information in this article is general and does not constitute legal, financial or tax advice. Every move should be reviewed by a lawyer, a tax advisor and a mortgage advisor according to the circumstances.
