Important points to know before taking out a mortgage in Israel
If you got a chance to check out my website, you probably understood that from the bank’s stand point, your interest is not their main concern.
Danny and Liora’s Story
Danieli and Liora, a lovely couple, and parent of three children, immigrated from New Jersey to Israel a year and a half ago. Danny and Liora decided to take their time before purchasing a house. During their first year in Israel, with all the other hardships of language and culture, that comes with absorption in Israel; they searched the country for a house that will check off all their boxes and serve all their needs, including close proximity to a good community with quality education institutions nearby. Their efforts paid off and the couple found their dream home in a new town near the Shfela (Lowloands) region. In accordance with their initial capital, Danny and Liora needed a mortgage of 1.5 million NIS from the bank.
The couple came to the bank and requested for a mortgage quote. The meeting with the bank clerk was very disappointing. The language barrier along with the complicated and tiring bureaucratic Israeli system, caused the couple to leave the meeting confused, and with an offer, that they no idea what the long term consequences would be.
With a feeling of helplessness, Danny and Liora consulted with their Israeli friends who recently bought a house in Israel, but they too expressed that they did not really understand what their mortgage quote offered. They too, didn’t actually know how much they would have to pay eventually.
They eventually contacted me after a few recommendations that they received. We scheduled a meeting, where we reviewed the bank’s offer. It was evident that the bank’s offer was indeed a good one, but it was good for the bank, not for Danny and Liora. The bank is only interested in large sums of money that its clients need to pay as interest according to the plan chosen.
During the meeting I explained everything in a clear and understandable manner. They understood all the information needed to understand all the aspect of their offer, even the small details and small print; so they can be aware of the implications of their decision.
We arrived together at the bank two days later. At the end of the meeting we left with a much better proposal and much more affordable mortgage rate. They saved 160 000 NIS. Within a few days, we received all the necessary documents, we purchased a mortgage insurance policy, and returned to the, and came out with a signed deal.
There are many immigrants like Danny and Liora, and many foreign residents, that find themselves confused by the complexity of the process of taking out a mortgage in Israel. Many simply prefer to trust the bank clerk, and thus consequently find themselves with their hands tied to the heavy repayments, and even debt in their foreseeable future.
This precisely what I am here for.
Here are some important points to know before you begin the process:
What is the difference between taking out a mortgage in Israel and taking one in the USA?
There are many differences. The main ones are, that in the USA the banks are the ones who take care of all the bureaucratic matters, obtain all the approvals and all the necessary documents. In Israel, the buyers are the ones who have to take care of the whole process.
In addition, the federal laws in the USA require the banks to be fully transparent about all the details of the mortgage plan. In Israel, however, there is no law obligating the banks to be fully transparent. Therefore, you cannot be sure that the banks will provide all the details needed to make an informed decision.
It is important to know that while the interest rates in the USA are fixed, in Israel there is a variable interest rate which affects the rates of repayments over the years.
The interest rate payments are subject to change over the years. In Israel you can choose that your mortgage can include different tracks. For example, 30% of the mortgage will vary for 10 years, 35% fixed for 25 years, etc. The American plan consists of a constant 100% non-division mortgage rate.
How can you find the right house and neighborhood in Israel?
Finding a suitable community and home is a process that requires a great deal of knowledge, and familiarity. It is not enough just to believe what people tell you, rather, It is necessary to go experience the neighborhood and the its population, culture, etc.
In order to find a suitable home, you should consult a professional, who can go to the neighborhood and ask the neighbors the right questions, review the home specifications, and check if it fits your needs. There is no substitute for the actual experience in choosing a home for your family.
What is the benefit of using the services of a mortgage broker?
This is probably the most important financial that you will ever make. A local mortgage broker is the one who knows how to help you make these important decisions. Choosing a mortgage is a process that contains many issues: the financial situation, future plans, existing plans, mortgage terms, repayment schedules, interest rates and more.
An experienced mortgage has in depth knowledge of the markets and the banking system. He knows how to demand the right plan for his clients, and push for the best terms. The local mortgage broker knows how to explain the processes in a clear manner, including the small print and all the fine details. The broker will save you a lot of time and headache in taking care of all the unnecessary complications, taking care of the paperwork, approvals and documents; and will accompany you until you sign off on your mortgage.