The high cost of housing in Israel makes it impossible to buy an apartment without taking out a mortgage. In order for the bank to approve a regular mortgage for you, you should start in advance with the stage of finding sources of financing. The process of taking out a mortgage requires raising equity. Those who do not bring sufficient equity will find it difficult to raise an affordable mortgage. The experts of the Meni Group – Marketing Financial Entrepreneurship, make it accessible for you to find sources of financing for raising sufficient equity. Don’t miss this information if you’re about to take out a mortgage.

What is equity?

First of all, it is important to understand what a mortgage loan consists of. When you are interested in financing the purchase of an apartment, you are required to take out a mortgage. The bank will not give a mortgage to someone who does not have their own basic equity to finance the large loan. The amount of equity required for a mortgage is 25% of the value of the property or the price of the apartment, whichever is lower.

Thus, in order to purchase an apartment at a price of NIS 1 million, the apartment buyer must raise equity of at least NIS 250,000. The greater the equity relative to the amount of the loan, the better the terms of the loan. But we will discuss this later.

Ultimately, equity is the money you bring from home to purchase the apartment. With reference to the example we mentioned here, you bring 250,000 shekels and the bank completes the rest of the sum – 750,000 shekels.

How does the amount of equity affect the terms of the mortgage?

It is not easy to find sources of financing, but if you manage to bring in more equity than the required capital, you will be able to enjoy better loan terms. The first thing that is important to understand is the variable loan amount. After all, the moment you bring more money from home, you also need a smaller loan, so you can get better interest rates.

The interest rate set refers to the amount of existing equity. For equity of less than 40%, you will receive expensive interest rates, compared to cheaper interest rates you will receive if you raise more than 55% financing for equity.

How much equity do you need for a regular mortgage?

The amount of equity required varies according to the type of mortgage. The amount of equity required is not decided by the bank, but by the Bank of Israel, which supervises the banks. It is not possible to get a mortgage as long as the equity is not sufficient. At the same time, it is possible to take out loans in order to increase the amount of equity and enjoy better mortgage terms.

Type apartment whichever is lower. Developers whichever is lower. apartment whichever is lower. Price

Mortgage	The amount of equity required
A regular mortgage for the purchase of a first and only	25% of the value of the property or the price of the apartment,
Mortgage for Housing	30% of the value of the property or the price of the apartment,
Mortgage for the purchase of another	50% of the value of the property or the price of the apartment,
Mortgage Buyer’s Price or Target	10% of the value of the apartment on the free market, with the minimum being NIS 100,000.

Finding Sources of Financing for Equity

The rising cost of housing prevents many couples from getting an apartment of their own. It is not easy to raise sufficient equity, so you should be familiar with the possible ways to finance the equity. There are many ways to do this, but as you can see, not every way will be for everyone. Check out which options are right for you.

Savings Vouchers

If you have savings in your name, now is the time to break it and enjoy its fruits. If you don’t have savings yet, now is the time to open one. You won’t lose out on future savings. The most common way to finance equity is to save money from your day-to-day income.

Loan from a study fund

If you have a study fund, whether it is liquid or not, you can gain a lot from taking out a loan from it. It is possible to take a loan from a study fund and receive significantly lower interest rates relative to the level of interest rates in the market. The amount of the loan that is made possible is subject to the liquidity of the fund’s funds. As long as the fund’s funds are illiquid, you can get a loan of up to 50% of their amount. Once the fund’s funds are liquid, you can take out a loan of up to 80% of the amount of the savings in the fund.

Assisted by the Family

If your parents or siblings and friends have the option of lending you a significant amount of money so that you have sufficient equity, go for it. Rising housing prices also require such solutions. Of course, here too, it is important to pay attention to the repayment dates of the loan. You can’t commit to something that you don’t know how you’re going to repay… However, for the most part, a loan from family members is more flexible.

Existing mortgage refinancing

If you have an apartment in your name and are now interested in purchasing another apartment and lack equity for it, you can refinance the existing mortgage to finance the new purchase (if there is a mortgage on it at all, if there is no mortgage on it you can easily mortgage it and enjoy efficient financing).

Non-bank loan

The credit market is growing day by day. Many non-bank entities will be happy to offer a loan for equity. The interest rates will of course be expensive accordingly, so it is important to check the feasibility of such a loan carefully. At the same time, it is important to remember the upcoming mortgage payments before committing to a long-term loan. You can’t commit to repaying a loan as long as you can’t afford a high monthly charge that includes both loan repayment and mortgage repayment. It is important to know that the bank will not approve a loan when it knows that the existing equity was obtained through a loan.

Reverse mortgage

This is not a recommended way, but if we are already talking about finding sources of funding, it is impossible not to mention it. A reverse mortgage allows people aged 60 and over to take out a loan in exchange for a mortgage on the existing property in their name. The loan is paid only after the borrowers die, and thus many young people use it as a source of financing to increase their equity. However, it is important to remember that this is usually not a profitable way because even after death the loan will need to be repaid, the heirs are not always able to meet the mortgage repayments, which will be reduced with linked interest rates, and therefore the bank is forced to sell the mortgaged apartment. If you have thought of applying to your parents to take out a mortgage, it is important that you are aware of the risks involved.

Finding sources of funding for ancillary expenses as well

It is important to remember the expenses associated with a mortgage. Many times mortgage borrowers do not remember the associated expenses and eventually find themselves having trouble meeting them. The accompanying expenses include: attorney’s fees, real estate appraiser’s fees, registration fee costs, purchase tax when it comes to a second apartment or an expensive apartment, property renovation costs if necessary, transportation, furniture purchase, and more.

Don’t take out a mortgage alone

When taking out a mortgage and starting to look for a reliable and suitable source of financing, it is important to seek professional financial guidance, even if it is a regular and simple mortgage. A professional will know how to direct you in the right way for you and bargain with the financing entity to lower the interest rates offered. At Meni Group – Marketing, Entrepreneurship and Finance, we are happy every time to accompany our clients to their real estate success. With us, you will receive personal guidance that will help you find suitable sources of financing and reduce the mortgage in exact accordance with your personal needs. In order to get an affordable mortgage from the bank, it is important that you do something. Applying for financial support is much more than a necessary step. Don’t give up on that.