Archives for February, 2007

prime rate

Down to 4!

Down to 4! The Governor of the Bank of Israel lowered the interest rate to 4% yesterday. You can read about it here. This means that the Prime rate will be going down to 5.5%, and with it mortgages linked to the prime. Last time I wrote about buying high and selling low. This lowering of the interest rate is a good sign that the dollar-shekel exchange rate has its low and the CPI (מדד) is probably near its high. Read my previous post to see why this is a good time to shift to this type of mortgage now. Back in the bad old days of a weak shekel, the Bank of Israel had the interest up over 20%! This was done to...
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israeli mortgage

Buy High—Sell Low!

Buy High—Sell Low! In real-estate, like all other investments, the key is to buy low and sell high, right? While this is true of property prices just like with stock prices, with your mortgage, the opposite is true, however counter-intuitive it might seem. Most Israeli mortgages are linked to some sort of index: the consumer price index (מדד), Dollar, Euro, cost of financing (prime), the cost of building index, and more. You’ve probably heard the stories about the people in the States who owe more than their homes are worth. They bought their homes entirely with mortgages, and then property values started to fall. While you should definitely be content that you’re not in this position, this isn’t the time to rest on your...
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Is Shorter Really Better?

Is Shorter Always Better?Native Israelis love to be house poor. They will take on as high a mortgage payment as possible to finish paying off their mortgage in 12 years instead of 15 years. In America, more and more people are getting 100% financing of their homes, with amortizations of 40 or 50 years or interest only loans. Which of these approaches is better? Neither of them is ideal for all borrowers. The shorter amortization means higher monthly payments. The sad truth of the situation is that most Israeli spend more than they earn each month. The interest on consumer credit (over-draft or credit cards) is around 20%, the interest on the mortgage is around 5%. While it is far more prudent to have...
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Should you refinance?

The financial markets in Israel are in a unique position right now. The dollar is historically low. The interest rate is historically low. If you took out a mortgage in Israel in the past three-ten years, the chances are that we can save you tens of thousands. For instance, if you took out a mortgage in 2001, the average prime rate was 8.45%. Today it is 5.75%. The typical Israeli mortgage is for about 500,000 NIS for 15 years. In this case, the outstanding balance today would be around 345,000. Just remaining with a similar program, would save you over 51,000 NIS! Of course, the best programs six years ago, aren’t the best programs today. There are also different mortgage alternatives available, which could...
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