When purchasing property in Israel, many buyers will need to take out a mortgage from an Israeli bank. Since there are various types of mortgages available from the banks in Israel, it is extremely important firstly to understand the options in order to select the loan that best fits your financial situation and the prevalent global/local economic climate (eg: fixed versus variable rate loans, early exit options – with/without penalties, etc.).
Choosing the correct mortgage option
Each mortgage is designed and suitable to a particular client depending on many factors, such as currency of income, place of residency, financial goals, economic situation and outlook, risk adversity, and more. It is, therefore, essential to understanding the terms and conditions of each type of loan offered in order to ensure that you are receiving the option that best suits your financial needs.
Small differences, for example, in interest rates and payment terms can have a comparatively large effect on the overall cost of the loan, especially considering the length of time over which a mortgage runs. So too, the size of the loan and number of years it will run. It is, thus highly advisable to compare a few loan options and to negotiate with different banks on the rates and terms before deciding on any specific loan from any particular bank.
Approval process tips
Also, if you are planning on funding the purchase with the assistance of a mortgage, you should bear in mind from the outset that in Israel you will
require approval for the mortgage prior to signing the purchase contract as it will not be conditional upon your mortgage approval – and keep in mind that the mortgage process will take time.
Furthermore, it is also important to determine how much money the bank will be willing to lend you as one can only borrow a percentage of the bank appraised value of the property.
A person’s income will also be a decisive factor in obtaining approval for a loan and while assets will strengthen the application, income carries more weight. In the event that the borrower does not have sufficient income, guarantors for the mortgage can be used.
There are also various hidden costs to look out for, so be sure to clarify all the costs relating to the mortgage.
Mortgage brokers offer a unique service of assisting purchasers with everything relating to obtaining a mortgage. Mortgage brokers are professionals who specialize in the field of mortgages and can save you much time and anguish in this entire process. After understanding your needs and position, they will do all the leg work for you and bring you the best options available to you as well as helping you through the approval process. Generally they charge a fee of 1% of the mortgage.