What happens to a joint mortgage when spouses divorce in Israel?

Israeli mortgage agreements are contractual obligations between the borrower couple and the lending bank, governed by the Banking (Service to Customer) Law 5741-1981 and Bank of Israel directives. The bank's rights as creditor are entirely separate from any divorce settlement reached between the spouses. A family court order transferring the marital home to one spouse does not release the other from the mortgage unless the bank expressly agrees in writing. Banks will only release a co-borrower from a joint mortgage if the remaining borrower demonstrates sufficient income and creditworthiness to service the full loan independently. This typically requires a new credit assessment, and the bank has a commercial right to refuse even where a court has ordered a transfer. Refusing the bank's cooperation is a common practical sticking point in Israeli property division on divorce.

When neither spouse can qualify alone to take over the mortgage, the family court's most common remedy is an order for sale of the property (*tzav mekhira*) under Section 40A of the Land Law 5729-1969, with the net proceeds — after the mortgage is repaid from the sale price — divided between the spouses in accordance with their respective entitlements. If one spouse refuses to cooperate in the sale, the court can appoint an agent to manage the transaction without that spouse's participation. For foreign nationals whose income is earned abroad, Israeli banks apply additional scrutiny when assessing their ability to refinance. A spouse who has contributed disproportionately to mortgage repayments during the marriage may be entitled to an offset credit within the equalization calculation under the Spouses (Property Relations) Law — documenting each spouse's payment history from the outset of proceedings is therefore important.

From the full guide: Division of Assets on Divorce in Israel: What the Law Provides

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