Archives for October, 2010

mortgage rules

The Real Israeli Mortgage Rules #2: timing

We can usually have a client approved within a few days after we review their full documentation and interview them. Actually executing your mortgage could take anywhere between a few weeks and several months. There are dozens of factors which might hold up your loan. The most common obstacle is a problem with the property rights. We can usually  tell if there will be a problem from our initial review, but not always. There are lots of hidden things that can prop up. For instance, the process of transferring property rights to the final owners can at times take years. During the process, it is nearly impossible to register a new lien. Right now I have a client who can’t refinance because one of...
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bank of israel

New Mortgage Regulations

Here is the press release from the Bank of Israel: הודעה לעיתונות – 25.10.2010 – המפקח על הבנקים פירסם טיוטת הנחיות חדשות בנושא הלוואות ממונפות לדיור בריבית משתנה   The newspapers and radio shows got a lot of my pipeline clients into a scare with this. In general, the new rules will change little for most of our clients.   An Ambiance Regulator The Bank of Israel is trying to make mortgages more expensive. Right now they are limited in their ability to do this because of the strong shekel. Also, Governor Fisher left the interest rates unchanged at 2% (the  prime rate is 3.5%). So he wants mortgages to be more expensive, yet can’t raise rates. The only other avenues left open are...
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banks

Real Israeli Mortgage Rules

Please review this series of posts about the rules that you should follow for taking out and executing a mortgage in Israel. I emphasize loan execution. It is not always easy to get approved for the right loan at the right bank, but with a little bit of work we usually get what we want. However, execution is a totally different story, it is out of our hands, and there are lots of little things that you can do to mess up your own loan. You can find lots of lists of rules and regulations about mortgages in Israel. You should ignore most of that stuff. Though much of it might be technically correct, it will set you on the wrong track. Work with...
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capitalization fee

Who’s afraid of a capitalization fee?

In Israel we have something called a capitalization fee in most mortgages. This is a fee that is paid when you repay a loan earlier than the amount of time that you said you would. For instance, if you took out a 25-year loan, and wanted to pay it back after five years, there would be a very good chance that you would have to tack a capitalization fee on to it. Unfortunately, people who don’t understand finance have given this fee the misnomer penalty. Early repayment penalties are a common feature of most mortgages in the USA. In the UK, they use a formula similar to ours, but almost all loans there get reset after at the most 5 years. Why is this...
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capitalization fee

Appendix: Calculation of Capitalization Fee

If you search enough around the Bank of Israel site, you will come up with this beauty: I have placed in the actual numbers from my client’s loan from the above example. (please click on the graphic to see a legible copy) The principles of this worksheet are: We take the present value of the loan per my client’s to the bank, subtract from this the amount that the bank could get for the same money today, and we get a preliminary number. The Bank of Israel then forces the bank to discount the amount owed according to the schedule. In the case of my clients, they haven’t yet had their loan for 3 years, so the amount of their capitalization fee is 94,200....
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