Tel Aviv apartment 311.
(photo credit: Courtesy)
For many people, the idea of becoming mortgage free is the ultimate quest. After
all, who would not jump at the chance of shedding your most costly monthly
outlay? Combine that with the prospect of cashing out on your property, and it
is no wonder that ridding yourself of your mortgage is considered a
However, equity and investments, even when tied up in the
relative safety of property, never stands still. The truth is, if you have
managed to shed the burden of a mortgage, you can still leverage your money to
be working for you. Although it may seem counterintuitive, one of the best ways
to do this is to consider remortgaging.
Traditionally, remortgaging is
viewed as a financial tactic for those looking to restructure existing mortgage
payments. And for anyone currently tied to a lengthy mortgage plan, there are
plenty of advantages in doing so.
For a start, there is a good chance
that you will find a deal with better interest rates compared to when you first
agreed to your payment plan, especially as your credit rating will most likely
have improved since then. However, the real saving comes in shortening the
amount of time to pay off your mortgage by acquiring equity in your home.
Switching from a 30-year plan to a 20-year mortgage will make a significant
difference to your interest payments.
However, remortgaging should be
viewed as equally advantageous for those who are lucky or astute enough to be
free from the shackles of a mortgage. After all, if you have 100 percent
ownership of a property, then you are quite literally sitting on a significant
sum of money, part of which can and should be released to be invested
Moreover, if it is a home that is steadily increasing in value,
even at a slow pace, then you should have particular peace of mind over the risk
in relinquishing part of your equity, safe in the knowledge that the remainder
of it is continuing to grow. The actual process of remortgaging should not be
too much of a headache.
Although negotiating your original mortgage may
have proven to be a torturous process, you can expect a much easier ride the
second time. If you have consistently been making regular repayments over the
years, then banks will most likely be keen to lend with confidence.
of which leaves you with the question of how to invest your newf-ound capital?
For most Israelis in this position, the possibility of purchasing another
property may well appear fanciful. Property prices continue to climb, and
although home values are not spiking at the rate that they did during 2009-2010,
they remain on a steady upward curve.
During 2012, the average Israeli
home increased in value by 6.7 percent and shows no sign of changing direction
any time soon. Even if a bargain can be found, there is little prospect of
yielding impressive returns. Gross rental returns on Tel Aviv apartments are
moderate at best, currently standing at an average of 3.3% annually. These
modest figures are particularly striking in the face of a general decline in
mortgage interest rates in Israel since 2003, which fell from an average of 6.7%
in January 2003 to 2.31% in June 2010. However, purchasing an additional
property is not entirely out of reach, so long as you are prepared to look
further afield. Increasingly affordable and attractive investment opportunities
can be found in the United States, especially in the “second tier” of large
Compared to Israel, the American property market has experienced
dramatically different fortunes over the past few years, with the property crash
dragging prices to rock bottom in 2007- 2009. However, the green shoots of
recovery are poised to sow the seeds of a gradual increase in
This is especially true for cities such as Pittsburgh, Houston
and Columbus, which were not ravaged by the extremities of the crash and have
begun to recover already. Sustainable industries or attractive employment
opportunities in these locations allowed property prices to retain some
stability. The energy industry remains king in Houston, while government and
academia continue to dominate in Columbus. Meanwhile, Pittsburgh has
successfully transformed itself from a steel city to a hub of intellectual
The cost of property in these cities is eminently more
affordable than in Israel. The average cost of a Pittsburgh property last year
was $168,612, although single-family homes can be purchased for much less. As an
investment, you can typically expect impressive returns of at least 12%, an
altogether more attractive proposition than your typical Tel Aviv
Making all of this a profitable reality requires a change of
mind-set. Rather than viewing a mortgage as a burdensome weight to be discarded
as quickly as possible, considering remortgaging as a sound financial move can
open up a world of investment opportunities.
Meanwhile, the realization
that property investment in the US is no longer prohibitive to Israelis, but in
fact potentially lucrative, is the best way to make the most of this new
investment firstname.lastname@example.org Aaron Harow is a partner at
BRHE Group LLC, a real-estate company that specializes in investments in the US