Archives for israeli mortgage

bank of israel

Rates rise, still very affordable

The Bank of Israel has left the official interbank rate at the all-time low of 0.1%. It has been at this rate for 9 months now. The official BoI rates are available here. No reason to be alarmed but the rate of mortgages continues to rise. This is a very minor increase, the average of all inflation indexed loans is now 2.68, up about half a percentage from  last summer’s all-time low. You can see the official BoI average mortgage rates here. If you play around with the numbers you’ll get a different number, slightly higher. Presumably this is because the Supervisor of the Banks is employing a weighted-average. We’ll never know because they don’t publish their methodology. Interestingly I saw something in Globes about...
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financial news

Mortgage rates going up

It’s been a long while coming, interest rates on mortgages have finally started raising from their historic lows. This was bound to happen at some point in time. Surprisingly it came with sharp increases rather than the typical gradual increments that we are accustomed to seeing in interest rates. There is a very common misconception that the Bank of Israel official monetary policy directly impacts mortgage rates. They don’t. Bank of Israel rates have been unchanged and remain at the historic low of 0.1% as of this writing. This immediately affects only the prime rate (BoI rate + 1.5%) and quite closely the Makam rates (short-term bond index). All of the other rates are determined by supply and demand and the cost to the banks of lending. To keep...
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economic news

Programs, get your programs

Rumors of stupid government programs have once again placed a funk on the market, and there are few real-estate transactions right now. Amongst the programs that won’t change anything are: 0% VAT, 90% mortgages for first time buyers, and target price. All are populist laws and/or programs being purported by different parties to show that they are doing something. These well-intentioned people got voted into positions of power based upon their promises of change, but are unfortunately way out of their league in terms of ability to actually change anything. Respectively the programs are being advanced by There is a Future (Yesh Atid), Yisrael is our House (Yisrael Beitenu), and the Jewish House(HaBayit Hayehudi) (amazingly I can’t find a website for this movement, if you know of...
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capitalization fee

Mortgage Refinance — for whom and when

We had a big wave of refinancing a few years ago. The interests rates were falling and most people could save a lot of money. The wave is behind us, but for those who still didn’t refi, they should consider doing so now. In general there are two types of people interested in a mortgage refinance: Those who want to reduce their monthly payments. Those who want to take advantage of good rates to readjust their long-term financial planning. In most cases, those in category 1 usually end up no better than they started out. Those in category 2 can usually do very well. Refinancing a mortgage is a manageable, yet non-trivial process. Long term you can save hundreds of thousands, but to achieve...
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israeli mortgage

Your house costs more than you think–Rule #6

Be  prepared for something for  which you are not prepared. Real estate transactions and their financing are not quite so catastrophic as to demand the full force of Murphy’s Law. However, after hundreds of real estate transactions, I can promise you one thing: something always goes wrong. Your house costs will be higher than you calculated Most times these are minor annoyances that cost only a few thousand shekels to fix. Some times these  are actual deal  breakers that force considerable additional unforeseen costs, including extending rental contracts or finding a new property. Here is a brief list  of some additional house costs that were incurred by recent  clients: problems with the property deed problems with building permits low appraisal late additional demands by...
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exchange rates

All predictions wrong, or your money back (exchange rates)

The headline is a quote from one of my favorite sports columns (the only one that I really read), TMQ. As I am porting my blog and site to its more modern home on Nahala.net, I’ve had the chance to go over a lot of ancient posts and reflect upon predictions that I and others have made over the past seven years. Until now, almost all bank experts have been wrong, and I have been right! Here is one example: According to Shlomo Maoz, an expert, in 2007-2008 we should have seen the USD-Israeli Shekel exchange rate bottom out at 3.9, later rebounding to 4.7. You can read the original @Globes. What really happened? Here is a chart detailing the monthly averages of the exchange...
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bank of israel

6 months have gone by, new mortgage regulations!

Wow, can you believe six whole months have gone by and no new mortgage regulations. Time to remedy that. The regulator of the banks, Dudu Zaken has announced additional mortgage regulations. The New Mortgage Regulations A direct quote from the new mortgage  regulation announcement by the Bank of Israel: A banking corporation shall not approve a housing loan (mortgage), the monthly repayment of which exceeds 50 percent of monthly income.  Housing loans where the monthly repayment is between 40 percent and 50 percent of monthly income shall be weighted at 100 percent for the purpose of calculating the capital adequacy ratio. A banking corporation shall not approve a housing loan where the portion of the loan at variable-rate interest exceeds 66.7 percent (two-thirds) of the...
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israeli mortgage

Where should you be saving?

Real estate transactions are expensive. Outside of the cost of the property, you have to pay taxes, legal fees, agent fees, bank fees, movers, cleaning and polishing and most of us like a new kitchen and at least some furniture. Be prepared to pay a total of around 10% more than the cost of your home. This is a lot of money. And unfortunately we can’t take it into account in your mortgage. When you are approved for a mortgage it is a factor of the appraised value of the property or the purchase price, the lower of the two. If you are buying a house for 2.5M NIS, with a 1.65M mortgage, you should have enough money to cover not only the remaining 850K,...
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capitalization fee

Embrace the Mortgage Penalty

1/1/66 Happy New Year! Today is the first day of the 66th year of our Redemption. Celebrate! Many Israeli mortgage types have what is commonly called a mortgage penalty associated with them if repaid early. In actuality there is no real penalty,  but a regulated capitalization fee associated with it. This fee is defined by the Bank of Israel,  and the banks do not have to charge it. In  the United States,  a mortgage penalty (also called prepayments) are  a negotiable part of a loan. Typically they range from two months interest to 80% of six months interest. Many times these penalties only apply if a loan is refinanced and not if the property is sold, and sometimes only during the first two years of a loan.  In the...
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bonds

Cheap is not good

People’s natural inclination is to look for the best deal. Have you heard the Eldan commercials on the radio? People want to keep on talking about the great deal that they got. I haven’t checked the statistics, but I’m sure that Zap or a similar website is in everyone’s bookmarks. We occasionally get clients who think the same is true for mortgages. It is not. There are so many factors that  go into selecting the proper mortgage. Price is only one of them, and not by any means the most important. Say you took out a 1 million shekel loan. If you shop around and get the best rate you might get something around 0.2% less than the going rate. Big deal. It isn’t even...
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