Provided by BHII – Buy Home in Israel. Click here to read the full guide
There is a wide range of options proposed by lending institutions when purchasing a mortgage; hence it may be a hassle deciding on the best go-to option. In 2020, Israelis took out mortgages, a total of NIS 78.1 billion ($24.89 billion), with a 50% increase over the past 12months.
While you may still be awestruck by this figure, it’s important to get familiar with how Israel’s mortgage finance system works. This can help you reach a conclusive decision on the mortgage system and fit it into your financial budget. This article has everything you need to know when going for your mortgage in Israel.
Different Types of Mortgage in Israel
Below are some of the most common mortgage options available in Israel.
1. Foreign Exchange Mortgages
This type of mortgage deals with all types of foreign currency exchange, whether in Dollars, Euros, Japanese Yen, Sterling, and Swiss Franc all interest rate is hinged on the London InterBank Offered Rate.
This mortgage type is beneficial to those who earn in other foreign currencies to prevent rising instability in currency exchange. For example, An individual who earns in Euros chooses a Euros mortgage to avoid the effect of devaluation in Euros. In addition, this can help to minimize the risk involved in taking out loans from other currencies.
2. Shekel Mortgages
The shekel mortgage is a defined system where financial payments are directed to the Bank of Israel prime rate. While the mortgage agreement is still valid, prime rates have a high tendency to fluctuate—the ultimate mortgage period of 30 years.
The cost of living increases by 2% yearly, It is important to note that at the end of each month, your outstanding payment is adjusted to fit into the cost of living index. This payment plan may not be daunting for individuals who cannot make an upfront payment.
3. Fixed Loans
Many mortgage institutions are coming up with a fixed-rate loan for customers, and this fixed rate is 20 years. This can offer individuals the luxury of time to make payment on the stipulated date. However, default in keeping to the pre-pay date can attract strict penalties.
Requirements For a Mortgage Loan
1. Open A Mortgage File
If you intend to get a mortgage, the buyer has to open a mortgage file at the bank, while at it, the buyer is required to pay an origination fee at the rate of 0.25%. To better understand, a buyer who takes up a mortgage of 300,000 NIS will be charged an origination fee of 75,000.
2. Have a Life and Property Insurance
An important requirement to access a mortgage is to own life and property insurance. Life Insurance can cost the sum of 100 NIS, while property insurance can cost 450 NIS of the initial purchase price of your property annually.
How to Apply For a Mortgage
Buyers must prove without reasonable doubts and valid evidence that their identity is trustworthy, and they have what it takes to repay the mortgage at the agreed rate and approved time. Here are some important documents to have’.
- Ishu Ikroni(pre approval letter)
- Current pay slips
- Current bank statement
- ID card, license of passport
- Current bank returns
Buyers can request an update on the procedure if there is a delay in the approval for a mortgage. A buyer must have a stable source of income which is three times the mortgage payment in a month, except a buyer has a partner in purchasing a property. Sometimes banks can demand that the buyer hire an appraiser to go over the property before certifying a mortgage.
Now you know what to look out for when you next seek a mortgage in Israel. However, there may be various pros and cons to every mortgage type; it is essential you go for mortgage plans that suit your current financial status. While you strive to meet your financial target, making financial commitments beyond your capacity may be risky.