Vol IV: Every bank we've gone to wants either 30%-40% of the mortgage up front and won't accept the small oleh mortgage as a downpayment even though it is guaranteed. What can we do?
By AVNER BUNTMANThrough their business, Avner Buntman and his consulting company Mortgage Israel see a real need for people to understand the mortgage industry in Israel. As the first english-speaking mortgage company in Israel, Avner and his team have given various seminars for Nefesh B'Nefesh and have helped hundreds of new olim and overseas buyers with their mortgage needs. Their firm specializes in securing residential and commercial loans primarily for the Anglo market in Israel. They will be answering questions on the Israeli mortgage market and guiding readers into making the right financial choices.Click here to send your questions to Avner and please leave your comments on the Q&A below.
Vols I - IIIVol IVQ: My wife and I are in our mid 50s and recently made aliyah from the US. We didn't own a home in America and thus, we have very limited money for a downpayment of any kind. However, our income is based on both federal and NY State govt pensions which would easily allow us to pay a monthly payment. Yet, with all the talk about olim getting easy rates and low down payments, every bank we've gone to wants either 30%-40% up front and won't accept the small oleh mortgage as a downpayment even though it is guaranteed. An Israeli can put down the 40% and make great money and lose his job, whereas our income (over $3000.00/month) isn't even considered. Are we trapped to remain tenants? Why doesn't any bank look rather at my ability to pay even a mortgage after the aliyah loan goes though?
A: Unfortunately the current economic crisis is causing banks to avoid high percentage loans. i.e. above 70%. The only way to buy a house, with a small down payment is by using EMI mortgage insurance. Have you asked your bank if they will consider a loan using EMI ?
Q: Can you tell me if the it's possible for foreign residents to still get a mortgage given the current financial crisis. How has Israel's mortgage industry been affected by the credit crunch?
A: Thank you for your email. It is definitely still possible for foreign residents (and Israeli residents) to get a mortgage from Israeli banks. The Israel mortgage industry is for the most part, (as of this writing ), weathering the financial credit crisis fairly well, in comparison to our overseas counterparts. There has been some tightening of risk parameters by the banks, translating into slightly lower percentage financing on residential properties. We are not seeing many lenders going above 70% loan to value, whereas six months ago, 75% or even higher was possible. We have also seen the banks less willing to consider, using EMI mortgage insurance, as a way for borrowers to increase the amount of financing they require. There has not been a "freeze" in these loan's, but rather a more conservative approach to approving higher financed purchases, i.e 70-90% loans.
With regards to the overall effect of the current financial climate on mortgages in Israel, we have seen a significant change in interest rates. The bank of Israel has lowered its interest rate by 1.5%, over the past 2 months, following a similar pattern of other central banks world wide. This has led to some of the lowest lending interest rates in Israel's history. This effort on behalf of Israel's central bank, is an attempt to shore up the Israeli economy and mitigate the effects of weaker worldwide economy, by boosting credit to the consumer. The hopes are that Israelis and foreigners will be encouraged to continue buying real estate (and other consumer products). So while credit might be a little harder to come by these days, it is still available and cheaper than ever before.
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