The 9 Steps to a Successful Real Estate Purchase - Managing the Mortgage

Buying a home has been compared to finding your way through a maze, purchasing a used car, or even traversing a minefield. Whatever you want to compare it to, there are sure to be times you find yourself saying, "I didn't realize that" along the way … Let's walk through one of the most confusing areas to navigate.

Most buyers require a mortgage to finance their apartment purchase. Even for those buyers who own other property elsewhere, the Israeli system can be perplexing and complicated. But don't worry: an informed buyer is the strongest buyer.

First, most loans require a 50% deposit up front, so you've got to make sure you can provide that down payment. The larger that deposit is, the lower your monthly mortgage fees will be. While first-time buyers who are residents of Israel can receive a mortgage for as much as 75% of a home's price (and accordingly put down only a 25% deposit), foreign buyers are eligible for mortgages covering only up to 50% of the cost (and must furnish a 50% deposit).

Furthermore, mortgages in Israel are available for a home's base price only. That means a mortgage can't be increased to include fees, taxes, renovations, furnishings, and other associated costs, so you'll need to have separate funds set aside for those. (Of course, if a mortgage doesn't exceed the above-mentioned percentage, one can of course raise the amount to whatever limit the bank sets.) This does sound overwhelming and expensive, but if you make these calculations before you begin looking for an apartment, you should be able to find property that's not only comfortable to live in, but will also be comfortable for your wallet.

As a rule of thumb, the Bank of Israel does not allow buyers to sign on a mortgage that requires payments amounting to more than 30% of their monthly income. Additionally, experts recommend building in a 2% buffer to that amount, to account for fluctuating rates, income changes, and other variations in circumstance. These numbers should already give you a basic idea of what kind of mortgage you can afford.

Unfortunately, individual buyers in Israel have very little bargaining power when working directly with mortgage banks. Occasionally, a person may not even be able to secure a mortgage on his own. That's where mortgage brokers come in. In Israel a mortgage broker isn't viewed as a luxury; employing the services of a knowledgeable professional or a brokerage service like The Getter Group can save buyers an untold amount of hassle. In one recent incident, a client saved a whopping $99,370 on a 12-year mortgage thanks to The Getter Group's intervention.

Wondering how all this works? Professionals have the connections, leverage, and know-how to secure the most competitive rates, and they're familiar with the notorious fine print, which in Israel often lacks transparency. They can see the big picture, analyzing the market in the long run, often advising clients to take out long-term mortgages, understanding that apartment prices continue to rise, even as currency depreciates with inflation. Whether its research, inquiries, headache, or heartache – not to mention money – there's a lot at stake in the mortgage process, and a professional will look after and support you through it.

Mr. Shia Getter is an authority in real estate and buyer protection in Israel. He founded The Getter Group to help homebuyers secure their interests and avoid pitfalls when buying in Israel. Enlist the experts. Contact The Getter Group today at 718-473-3950 or via e-mail at [email protected].

This article is intended for informational purposes only and is not meant to provide legal opinions, or to serve as a substitute for professional advice. The author does not guarantee that the information contained herein is complete or accurate and does not assume any liability for any loss or damage caused by errors, inaccuracies, or omissions contained in this article.