Major Mortgage Left Behind in Bank Switch: When Refinancing Makes Sense

When switching banks, a significant mortgage of NIS 1.2 million often remains with the original bank, even after salary and direct debits transfer to the new institution. Banking regulations stipulate that all loans and credit lines are excluded from the automatic transfer process. This necessitates either maintaining a minimal account with the old bank for mortgage payments or setting up a new direct debit from the new account. A complete transfer of the mortgage to the new bank is possible but involves a separate refinancing process.

Refinancing requires obtaining a balance statement from the old bank, a new appraisal, registration, and insurance from the new bank, incurring costs of thousands of shekels. However, early repayment fees for the mortgage receive a seniority discount of up to 30% after five years. Recent interest rate cuts have spurred a wave of mortgage refinancing, totaling approximately NIS 43.6 billion. For those simultaneously changing residences and banks, a third option exists: transferring the existing mortgage to the new property while retaining its original terms.

Closed deposits remain with the old bank until their maturity date, at which point the funds are transferred to the new account unless otherwise instructed. Liquid deposits, such as daily or weekly ones, should be withdrawn and transferred before initiating the bank switch to be included with the main account balance on the seventh day. Since 2025, banks are mandated to publish deposit interest rates in a uniform format, simplifying comparisons. For example, maintaining a 3% deposit with the old bank while opening a 12% overdraft facility with the new one can result in annual costs of around NIS 1,350 on a NIS 30,000 deposit and NIS 15,000 in overdrafts.

The bank switching process, known as 'niyud', typically takes seven days for the main account. Debit cards are blocked on the second day, requiring customers to order a new card in advance. Non-bank credit cards continue to function normally, with their payment authorizations automatically transferred to the new account. New bank debit cards may incur new annual fees and reset any existing spending thresholds for benefits. Overdrafts can be transferred to the new bank, but the new bank has the right to refuse them, which can lead to the rejection of the entire switch request. Mobile securities are transferred within 12-15 business days, while non-mobile assets, safe deposit boxes, and collateralized items remain with the old bank. Tax implications arise if assets are split, as losses in one bank can only be offset against gains in the other on an annual tax report. The 'follow me' mechanism, which has routed millions of transactions since the reform's inception, facilitates the transfer of salaries and benefits, but foreign currency transfers require manual updating of the sender. The entire bank switching process is free of charge.