Seven things you should know before you take a mortgage in Israel
1. How much money will the bank give you?
If it is your first apartment, the bank will give you 75% of the value of the house but not always. Sometimes the bank will limit the mortgage up to 50-60% of the value of the property- for example, a flat in an isolated area.
2. Where can you raise equity?
If you have a need of equity you can use a few creative solutions 1. You can take a mortgage for a property of one of your parents 2. Take a regular loan from the bank. Your bank will usually will be happy to give you a loan for up to 100,000 shekels. Check the interest they offer you. If it is not attractive enough, check if other banks are willing to offer you better terms 3. If you have an education fund you can ask from the body that manages the fund to give you a loan for it. Usually they will be happy to give you a loan on great terms for 50%-80% of the value of the fund.
3. How much will you pay the bank every month?
This question reflects the cost of the mortgage. If you take it for a short period- ten years for example- you are using the bank’s money for a short time and the interest you will pay for it, will be lower than if you take a mortgage for 30 years.
4. How much are you going to pay back every month?
Your mortgage is influenced by many variables- the inflation index, the interest of the bank of Israel, the dollar rate etc. Don’t rely on the mortgage calculators you see on the internet or even the ones the bank shows you. They do not reflect the real payments you will pay.
5. Should you use counseling for your mortgage?
Yes! The mortgage you are taking is the most expensive thing you will ever buy. Even if they improve the conditions of the mortgage by one tenth of a percent- That could be worth more than 10,000 shekels to you!
6. Should you use the advisor from the bank?
The bank has an interest to give you a mortgage that is profitable to the bank. It is like getting counseling about cars from the car salesman.
7. Who should you turn to?
It is recommended you find someone who is an expert in the type of deal you are involved in. If you are buying an apartment over the Green Line,there are certain features that regular counselors from Tel Aviv and Jerusalem are not familiar with.
Secondly, it is recommended that your counselor won’t only make the effort to get you the best terms for your mortgage but will also help you build up a clever financial plan to decide on the best structure for you which takes into account variables of the next thirty years.
From our experience in Segal Insurance we learnt that taking a buying a property and taking a mortgage is the biggest purchase of your life-get the advice of an expert before making a decision